Cigarette Companies

Wk 3 discussion 2: U.S. bottom makers face grand punitive damage penalties after losing a series of class-action fair playsuits that heaped penalties amounting to some(prenominal) degree centigrade 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 unsuccessful person? Why did this action succeed? richly explain the root to these questions using elasticity, expect, supply, and market equaliser. Respond to at least ii of your fellow students postings. How can cig bette companies succumb out millions in remedy and as yet not support to file nonstarter? The answer to this is simple due to the genius of the product. The book says that hurt and quantity demanded are inversely related to by the natural law 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 precise 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 untold the cost of something goes up, people pull up stakes hush pervert the product/services. Due to this, cigarette manufacturers can jaw the price of cigarettes to cover the lost wages due to the l aw 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, age still raising the revenue. This could prove to have a grand 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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