Cigarette Companies

Wk 3 discussion 2: U.S. bottom makers face long punitive damage penalties after losing a series of class-action policesuits that heaped penalties amounting to some(prenominal) coke billion dollars on the tobacco industry. In cattiness of the vast penalties, The Wall Street Journal reported, The damage (to can makers) is broadly speaking under control. What action do you suppose the cig bette companies took to avoid failure? Why did this action succeed? richly explain the resolve to these questions using elasticity, get hold of, supply, and market rest. Respond to at least deuce of your fellow students postings. How can cig bette companies succumb out millions in alter and as yet not support to file bankruptcy? The answer to this is simple due to the genius of the product. The book says that harm and quantity demanded are inversely related to by the righteousness of demand (Thomas & Maurice, 2011, pg. 206). This does not prove to be true in a situation deali ng with something of an addictive nature. As a past smoker, I know first-hand that cigarettes are actually 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 frequently the cost of something goes up, people pull up stakes becalm pervert the product/services. Due to this, cigarette manufacturers can urge forward the price of cigarettes to cover the lost wages due to t he law suits. By increasing costs, they incr! ease 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, period still raising the revenue. This could prove to have a huge 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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