Cigarette Companies

Wk 3 discussion 2: U.S. bottom makers face dour punitive damage penalties after losing a series of class-action practice of lawsuits that heaped penalties amounting to some(prenominal) cardinal billion dollars on the tobacco industry. In cattiness of the vast penalties, The Wall Street Journal reported, The damage (to can makers) is chiefly under control. What action do you suppose the cig bette companies took to avoid failure? Why did this action succeed? richly explain the decide to these questions using elasticity, necessity, supply, and market equaliser. Respond to at least ii of your fellow students postings. How can cig bette companies succumb out millions in indemnification 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 law of demand (Thomas & Maurice, 2011, pg. 206). This does not prove to be true in a situation dealing with something of an addictive nature. As a past smoker, I know first-hand that cigarettes are rattling 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 very much the cost of something goes up, people pull up stakes assuage pervert the product/services. Due to this, cigarette manufacturers can awake the price of cigarettes to cover the lost wages due to th e law suits. By increasing costs, they incre! ase 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, mend still raising the revenue. This could prove to have a wide 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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