Course Project Part 1
Name
Business Economics GM545
Professor
May 10, 2012

Exercise 1: Microeconomic Issues Reported ethical issues involving a company or its products can have a major impact on that company’s market position, social image, product demand, and resulting market value (price). Some markets are more sensitive to these issues than others, such as healthcare. Abbott Laboratories has been in the news in the past few weeks due to an ethical issue reported to the government. It was reported that Abbott was marketing their popular medication Depakote for health conditions that it was not approved for by the FDA. “Depakote is an anti-seizure and mood-stabilizing drug prescribed for bipolar disorder. However, the company admitted that it marketed the drug for unapproved uses, including treatment of schizophrenia, agitated dementia, and autism.” (Yost, 2012).
This admission will cost Abbott $1.5 billion in fines and settlement costs. More importantly, this admission may cost Abbott far more than the money. It may cost them market share and a damaged public image. Depakote is a very popular medication, but poor press around the company’s behavior around the marketing of the product can change the company image in not only the public, but with their direct customers such as hospitals and physicians. This can greatly impact demand for their product, impacting market price and profit for the company.
Abbott does have a very large market share compared to their competitors and have diversified to include hospital equipment from IV poles to feeding pumps and heart monitors, so this issue may not impact Abbott financially like it would a much smaller company. However, there is little doubt that it will have an impact but the scale of that impact will be determined by how Abbott addresses the action with the public. How will Abbott spin the