Cost-Push Inflation and Impact on Company Profits

 

 

Review:
https://managerialecon.blogspot.com/2013/10/deriving-stay-even-quantity.html
https://www.wsj.com/video/series/price-index/why-ceos-from-coca-cola-to-hershey-are-talking-about-price-elasticity/FAB951C0-6251-4FD5-9128-

Assume the role of CEO of one of the following hypothetical companies:
All America Grocery Inc. We serve communities in the middle of the income market, providing low prices for all basic grocery needs. Our modest-income
consumers expect good deals on good quality foods. The Covid-19 pandemic has put upward pressure on the price of everything we sell. Cost-push inflation
from multiple sources is impacting our operating cost and our cost of goods. We are both fortunate and unfortunate that the price elasticity of demand for
food is .20.
Very Big US Auto. Very Big US Auto is one of the oldest and largest manufacturers of autos in the United States. Very Big US Auto has an international supply
chain and is highly dependent on components manufactured abroad and assembled in the United States. Costs are rising in all aspects of production across
the industry. Very Big US Auto is seeing inflationary pressure in everything we use: labor, materials, components, and computer chips. On the demand side,
Very Big US Auto knows that demand is relatively elastic with a price elasticity of demand of 1.2. But we also know that the pandemic has made some
transportation substitutes less acceptable.
Big Time Entertainment. Big Time Entertainment is a nationwide firm providing movies, concerts, arcades, and other in-person entertainment venues such as
bowling and roller skating. Our operations have been heavily impacted during the Covid-19 pandemic, including continuing limits on the number of guests
and new costs associated with safety measures for both staff and customers. We are now reopening but facing continued cost-push inflation. We also face
uncertainty as to the potential for additional shutdowns. Customers are fearful, and the guidance on operating our facilities means we are operating far
below our optimal number of patrons to cover the higher cost of everything. Price elasticity of demand is 1.6, and we are also faced with competition from
online entertainment and gaming, which are not experiencing many of these cost pressures.
In your discussion post, address the following prompts within the context of your chosen hypothetical company of which you are the CEO:
1. Is the demand curve for your product relatively elastic, inelastic, or unitary elastic? Demonstrate this for your company’s product by how much the quantity
demanded will change if you pass on the 10% increase in cost. In other words, prepare a forecast showing by what percentage the quantity demanded will
change if your prices are raised by 10%. You must provide calculations showing the percentage change in quantity demanded.
2. Will you pass on most or all of the cost increase to your customers? Why or why not?

Sample Solution

This leads to question of what qualifies to be a combatant, and whether it is lawful to kill each other as combatants. Combatants are people who are involved directly or indirectly with the war and it is lawful to kill ‘to shelter the innocent from harm…punish evildoers (Begby et al (2006b), Page 290).However, as mentioned above civilian cannot be harmed, showing combatants as the only legitimate targets, another condition of jus in bello, as ‘we may not use the sword against those who have not harmed us (Begby et al (2006b), Page 314).’ In addition, Frowe suggested combatants must be identified as combatants, to avoid the presence of guerrilla warfare which can end up in a higher death count, for example, the Vietnam War. Moreover, he argued they must be part of the army, bear arms and apply to the rules of jus in bello. (Frowe (2011), Page 101-3). This suggests Frowe seeks a fair, just war between two participants avoiding non-combatant deaths, but wouldn’t this lead to higher death rate for combatants, as both sides have relatively equal chance to win since both use similar tactics? Nevertheless, arguably Frowe will argue that combatant can lawfully kill each other, showing this is just, which is also supported by Vittola, who states: ‘it is lawful to draw the sword and use it against malefactors (Begby et al (2006b), Page 309).’
In addition, Vittola expresses the extent of military tactics used, but never reaches a conclusion whether it’s lawful or not to proceed these actions, as he constantly found a middle ground, where it can be lawful to do such things but never always (Begby et al (2006b), Page 326-31). This is supported by Frowe, who measures the legitimate tactics according to proportionality and military necessity. It depends on the magnitude of how much damage done to one another, in order to judge the actions after a war. For example, one cannot simply nuke the terrorist groups throughout the middle-east, because it is not only proportional, it will damage the whole population, an unintended consequence. More importantly, the soldiers must have the right intention in what they are going to achieve, sacrificing the costs to their actions. For example: if soldiers want to execute all prisoners of war, they must do it for the right intention and for a just cause, proportional to the harm done to them. This is supported by Vittola: ‘not always lawful to execute all combatants…we must take account… scale of the injury inflicted by the enemy.’ This is further supported by Frowe approach, which is a lot more moral than Vittola’s view but implies the same agendas: ‘can’t be punished simply for fighting.’ This means one cannot simply punish another because they have been a combatant. They must be treated as humanely as possible. However, the situation is escalated if killing them can lead to peace and security, within the interests of all parties.
Overall, jus in bello suggests in wars, harm can only be used against combatants, never against the innocent. But in the end, the aim is to establish peace and security within the commonwealth. As Vittola’s conclusion: ‘the pursuit of justice for which he fights and the defence of his homeland’ is what nations should be fighting for in wars (Begby et al (2006b), Page 332). Thus, although today’s world has developed, we can see not much different from the modernist accounts on warfare and the traditionists, giving a

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