Cigarette Companies

Wk 3 discussion 2: U.S. bottom makers face farsighted punitive damage penalties after losing a series of class-action fairnesssuits that heaped penalties amounting to some(prenominal) blow billion dollars on the tobacco industry. In cattiness of the big penalties, The Wall Street Journal reported, The damage (to can makers) is primarily under control. What action do you suppose the cig bette companies took to avoid unsuccessful person? Why did this action succeed? richly explain the solvent to these questions using elasticity, deal, supply, and market symmetry. Respond to at least deuce of your fellow students postings. How can cig bette companies succumb out millions in indemnity and as yet non support to file bankruptcy? The answer to this is simple due to the genius of the product. The book says that damage and quantity demanded are inversely related to by the fair play of demand (Thomas & Maurice, 2011, pg. 206). This does not prove to be true in a sit uation dealing with something of an addictive nature. As a past smoker, I know first-hand that cigarettes are really addictive. At one time I verbalise that if cigarettes went up to $4 a pack I would hold on smoking. By the time I finally quit, they were over $5 a pack, and I did not quit because of the price. This means that the prices of cigarettes are very inelastic.

Being inelastic means that no theme how ofttimes the cost of something goes up, people pull up stakes nonoperational pervert the product/services. Due to this, cigarette manufacturers can give rise the price of cigarettes to cover the lost w ages due to the law suits. By increasing cos! ts, they increase revenue, and the millions in law-suits do not expunge them. They could evaluate their supply and decrease the supply (if in each way possible) which will lower the internal manufacturing costs, succession still raising the revenue. This could prove to have a commodious payout in the end. If this were done, the market equilibrium will change. The market equilibrium will be that point before the prices increase where the demand and...If you lack to get a full essay, order it on our website: OrderCustomPaper.com

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