If Coke increased its price, what would happen to Pepsi?

Since Coke and Pepsi are two similar products and not the same, people give preference to one over the other. The reason for it might be a slightly sweetened soda of Coke to that of Pepsi or a stronger soda essence of Pepsi over Coke. read more

Taking into this micro-economic aspect of preference, if Coke inflates its prices two things might happen. a) Even though Coke has increased its prices, there will be customers willing to shell out extra bucks for its USP, or customers simply switch to Pepsi seeing the inflated price of Coke. read more

`The demand curve for Pepsi and Coke would have shifted to the left, causing the price of both products to decrease and the profits for both companies to fall. read more

If Pepsi is a perfect substitute for Coke, then when Pepsi increases its price, the equilibrium for Pepsi will clear a lesser quantity; Coke will be substituted for Pepsi for the difference between the old quantity of Pepsi and the new equilibrium point, increasing its demand. read more