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economics question

What would be the effect of banning advertisements on soft drinks be on the demand and price?
I understand the demand curve would shift to the left, but any ideas about the price?
Fall in demand reduces price.
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SunDun111
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Original post by Sternumator
Fall in demand reduces price.


would that increse demand in the long term tho? since price has gone done.
No. The fall in demand means that at the current price there would be an oversupply. The fall in price is the adjustment that is needed in order to equalise supply and demand. So yes demand will increase and supply will fall as the price falls because that is the adjustment needed but theses are moves along the curves not shifts.
Reply 4
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SunDun111
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11
Original post by Sternumator
No. The fall in demand means that at the current price there would be an oversupply. The fall in price is the adjustment that is needed in order to equalise supply and demand. So yes demand will increase and supply will fall as the price falls because that is the adjustment needed but theses are moves along the curves not shifts.


ok thanks, one more question suppose that as an alternative to soft drinks, they is healthy drinks, would the demand for this increase in the long term due to the fact soft drinks are banned from advertising
Reply 5
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ions
15
The immediate effect is a fall in demand and thus a fall in price...obviously once the price starts falling demand is going to increase then but initially, its demand decrease and price decrease.

And yes I think the demand for healthy drinks would increase.
Original post by SunDun111
ok thanks, one more question suppose that as an alternative to soft drinks, they is healthy drinks, would the demand for this increase in the long term due to the fact soft drinks are banned from advertising


Yeah if they are substitutes which they could well be.

But talking about specific industries, I think it disguises the fact that really here we are talking about a purely theoretical perfect market.

In reality, you would struggle to see a significant empirical relationship. Coke would still be in the shops and people are unlikely to switch to water just because their wasn't a coca cola advert on the TV over Christmas.

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