Business Econimics - Research Paper Example

The elasticity of demand might affected too: Since trust is hard to earn and easy to lose, it is likely that once a company has violated ethical standards, consumers will be afraid of getting burnt again and will avoid the company at the first sign of trouble, making their offerings more elastic. Costs might raise: Contractors, suppliers and distributors might ask for a higher price for their service and goods, either because they feel that the company's bargaining position has declined, as insurance against potential malfeasance, or as compensation for the inevitable PR hit.

Ethical issues are more likely to occur in deregulated markets (Palast, 2002; Palast, 2004). This is for a few reasons. First: The kind of behavior that occurs in a deregulated market tends to already be less constrained by conventional ethics, meaning that companies that thrive in that environment are already likely to have unorthodox and perhaps unscrupulous cultures and practices. Second: Regulation, both by NGOs and government, tends to make companies more sensitive to the impacts of what they are doing; it might be seen by someone.

One of the major ways that Enron managed to get away with so much was the inaction of shareholders and the failure of accounting firms, auditors and regulators (Palast, 2002; Berenbeim, 2002). Consider a rise in demand for computer chips and potato chips. Potato chips are pure luxury items: They are highly elastic, because people can afford to go without potato chips. Computers and the chips that make them up, in contrast, are essential items for business, homes, political agencies and NGOs. The economy runs on telecommunication technology, credit card processing, etc.

that is all done through computerized systems. A reduction in demand can't hurt computer makers much, despite the relatively high cost of producing computer chips to potato chips, because they are so essential. In the short run, a potato chip maker might harvest more potatoes, run lines faster, or pack factories more tightly to increase production. A computer chip maker might do the same thing, but while the occasional green or stale potato chip is not a threat to the potato chip makers' reputation, a failing computer chip costs headaches in bad reviews, tech support headaches and so on.

Buying new factories for potato chips is likely to be easy: Buying and properly fitting new factories and training new personnel for computer chips is much harder. In the long run, of course, the potato chip company has to bear in mind that a new health fad, a change in the taste buds and palates of customers, a marketing campaign, or something else might harm the demand for their product. They can't afford to get too much excess. Further, potato chips must be strictly identified according to USDA standards, meaning rebranding is more difficult than it might seem and companies are less flexible than an initial review would suggest (2009).

However, computer chip makers know that, in the long run, their product cannot help but grow, as the Third World catches up and computerizes more and more and as more and more products need computer chips. Thus, it's clear that a product that is elastic might have some more flexibility in dealing with spikes, but tends to have difficulty maintaining those spikes and therefore taking advantage of them, whereas a less elastic product might take longer to get