Assume Coca Cola segments the market into two groups- Group A and B. Assume that consumers in Group A and B have preferences

U_A(x, C) = C^0.2 x^0.8

U_B(x, C) = C^0.7 x^0.3

Where x: is quantity of product x and C is the quantity of 200 ml Coca Cola.

If the average income in Group A is $ 80,000 per month and that of Group B is $ 40,000 per month and price of x is $ 1. Assume group size of A is 100 and that of B is 50.

(For Group A: MU_C = 0.2C^-0.8X^0.8 ; MU_X = 0.8C^0.2X^-0.2 )

(For Group B: MU_C = 0.7C^-0.3X^0.3 ; MU_X = 0.3C^0.7X^-0.7 )

1. Find the aggregate demand for coca cola for group A.

2.Find the aggregate demand for coca cola for group B .

3.Find the aggregate demand for coca cola.

part 2:

Assume that Coca Cola has dropped the idea of differential pricing but is mindful of the segmented market.

All Coca-Cola's beverages in 200 ml bottles will be sold at a flat $ 10, down from $ 15 .

1. Find thearc elasticityin this range for the aggregate demand curve.
2. How will revenue change for Coca-Cola based on your analysis?