04 Jun Question Employee Benefits Increasingly, employees are being allo
Question
Employee Benefits
Increasingly, employees are being allowed to choose benefit packages from a menu of items. For instance, workers may be given a package of benefits that includes basic and optional items. Basics might include modest medical coverage, life insurance equal to a year’s salary, vacation time based on length of service, and some retirement pay. But then employees can use credits to choose among such additional benefits as full medical coverage, dental and eye care, more vacation time, additional disability income, and higher company payments to the retirement fund. Using the theory of consumer behavior, how do you think flexible benefit packages would affect an employee’s preference between higher wages and more benefits?
Cigarette Makers Penalties
U.S. cigarette makers face enormous punitive damage penalties after losing a series of class-action lawsuits that heaped penalties amounting to several hundred billion dollars on the tobacco industry. In spite of the huge penalties, The Wall Street Journal reported, “The damage (to cigarette makers) is generally under control.” What action do you suppose the cigarette companies took to avoid bankruptcy? Why did this action succeed? Fully explain the answer to these questions using elasticity, demand, supply, and market equilibrium. Respond to at least two of your fellow students postings.
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