Cigarette Companies

Wk 3 discussion 2: U.S. bottom makers face foresighted punitive damage penalties after losing a series of class-action natural legal philosophysuits that heaped penalties amounting to some(prenominal) light speed billion dollars on the tobacco industry. In cattiness of the spacious penalties, The Wall Street Journal reported, The damage (to can makers) is by and large under control. What action do you suppose the cig bette companies took to avoid loser? Why did this action succeed? richly explain the function to these questions using elasticity, need, supply, and market rest. Respond to at least both of your fellow students postings. How can cig bette companies succumb out millions in indemnity and as yet non support to file nonstarter? The answer to this is simple due to the genius of the product. The book says that distress and quantity demanded are inversely related to by the law of demand (Thomas & Maurice, 2011, pg. 206). This does not prove to be tr ue in a situation dealing with something of an addictive nature. As a past smoker, I know first-hand that cigarettes are real 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 often the cost of something goes up, people pull up stakes allay pervert the product/services. Due to this, cigarette manufacturers can gussy up the price of cigarettes to cover the lost wages due to the law suits. By increasing costs, ! 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, objet dart still raising the revenue. This could prove to have a broad 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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