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Unformatted text preview: CourseSmart - BookReader 1 of 1 2012-04-06 18:34 Where Prices Come From: The Interaction of Demand and Supply Chapter Outline and learning Objective s 3.1 The llernud Side of tbt Martel, page 66 Discuss 1he vanables tt'Ot lnftuence demard. 3.2 Tbe S.pp!y Sfdt ol the Marbt, page 7 4 Discuss 1he vanables tt'Ot lnftuence supply. 3.3 Market Eq"lllbftsm: Pilling Demat d end Svppty Togetllt~ page 78 Use a graph to Illustrate mafl<et equlllbnum. 3.4 Tbe E lfect olllemaad and Suppty SlUts oa Eqaltlbrlvm, page 81 Use demand and supply graphs to predict changes In pnces and quant~les. CourseSmart - BookReader 1 of 1 2012-04-06 18:34 Red Bull and the Market for Energy Drinks Markets for some products suddenly explode. This was the case in recent years with energy drinks. Red Bull was developed in Austria by Dietrich Mateschitz, who based it on a drink he discovered being sold in pharmacies in Titailand. Red Bull entered the u.s. market in I 997. At that time, only a few energy drinks, such as jolt Cola, were available, and they made up only a sliver of the soft drink mar- ket. By 2009, however, sales of energy drinks were growing by 10 percent per year, which was a rate faster than sales of other soft drinks, even though energy drinks sell for three times as much per ounce as soda. Ute market for energy drinks has found a particu- larly valuable niche with students wanting an extra boost of energy while engaging in sports or studying. One report predicts that energy drinks might replace coffee for the current generation of teens and yotmg adults. The success of Red Bul~ Monster Energy, and Rockstar attracted the notice of the large beverage firms, as well as entrepreneurs look- ing to introduce new products into a hot market. Coca-Cola signed an agreement to distribute Monster Energy in 20 u.s. states, Economics in YOUR Life! Will You Drink Red Bull or Monster? canada, and six western European countries. Pepsi signed an agreement with Rockstar to distribute the drink throughout North America. New, mostly small, startup compa- tlies also appeared nearly every month. By 2009, 210 different energy drinks were for sale in North America. The intense competition among firms selling energy drinks is a striking example of how the market responds to changes in con- sumer tastes. Although intense competition is not always good news for firms trying to sell products, it is a boon to constmters because it increases the available choice of products and Jowers the prices consumers pay for those products. AN INSIDE LOOK on page 88 dis- cusses Red Butt's use of advertising to increase demand....
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