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Iced Tea Anyone? … Only 99 Cents a Can!
Yes, in early April 2022, the chairman of AriZona Beverages, Don Vultaggio announced that the price of a 23-ounce can of AriZona iced tea will still be at US$0.99. It has remained unchanged since 1992! To continue to sell each can of drink at a fixed price of 99 cents, Vultaggio has nimbly used scale, technology and constant tweaks to the business to keep costs down and revenues rising over the last 30 years. Examples include, streamlining operations at its New Jersey factory, using technology to reduce the amount of aluminum used for each can drink by 40%, and making deliveries to retail outlets in the night to reduce delivery costs.
This is refreshing news since inflation rate for the month of March 2022 was 8.5% with highest increases seen in necessities like gasoline, shelter and food as reported by the Bureau of Labor Statistics as well as rising temperatures as we head towards summer months ahead.
Discussion Questions:
- Based on the elasticity concept and that sale price is fixed at 99 cents,
- is this can of AriZona iced tea drink a perfectly elastic good or a perfectly inelastic good?
- Do explain your choice with a graph where the x-axis is the quantity of cans sold and y-axis is the price of the good.
- Would you classify this drink as a normal good, an inferior good or a luxury good? Do explain your choice.
- Use the CPI Inflation Calculator,
- to calculate the value of 99 cents (from 1992) today (in 2022),
- indicate the number you found, and
- explain if continuing to sell one can of AriZona iced tea drink at a fixed price of $0.99 today is sustainable?
- Self-reflection: As a consumer, would you take advantage of the fixed price and buy more cans of AriZona iced tea or less? Do explain.
Sources| Yahoo Finance: Inflation: 23-ounce Arizona iced tea can still costs $0.99; AriZona: About us; LA Times: As Inflation Soars, How is AriZona Iced Tea Still 99 Cents; BLS: Economic News Release/Consumer Price Index Summary; Investopedia: Elasticity vs. Inelasticity of Demand: What’s the Difference?; Economics Help: Different Types of Goods – Inferior, Normal, Luxury; BLS: CPI Inflation Calculator; Photo by Connor Dickson on Unsplash
