Inelastic PED (price elasticity of demand, this measures the responsiveness after a change in price), inelastic PED means that the demand (the quantity consumers are able and willing to pay for a product at any given time) is not very responsive to change in price, which means the percentage change in demand is less than the percentage change in price.
(∆%Qd /∆%P is <1)
Turing pharmaceuticals bought legal rights to a drug by the name Daraprim, they then increased its cost by 5000%, stating that it was necessary to fund research to create better drugs, than their 62-year-old drug Daraprim, they also stated that this will not be a problem to its main costumers, who are insurance companies and governments.
Daraprim is drug that is very PED inelastic …show more content…
Proportion of the consumer’s budget, this means if the product is very expensive can takes large portion of the consumer’s budget its then very likely to be elastic.
3. Degree of necessity, this means if the product is unnecessary or a luxury then its very likely to be elastic.
4. Duration of price change, this means price change in the long run tend to be elastic, as consumers are capable of finding substitutes or changing their behavior.)
Daraprim has no competitors in the USA, and one pharmaceutical company can purchase full legal rights, this means one pharmaceutical company can have monopoly over the market, which translates to them having total control over the price. Daraprim’s main costumers are governments or insurance companies, these costumers tend to have very larger budgets, and the price Daraprim is then a small proportion of their budget. Daraprim is a necessary drug to treat Toxoplasmosis (a parasitic disease) in patients with weakened immune system Eg. AIDs patients, this means is a very necessary product. Daraprim’s price change happened overnight, making the duration of the price change very short run. These four factors make Daraprim a very inelastic product, meaning that price changes will cause very slight change in quantity …show more content…
The Total revenue of Turing pharmaceuticals from Daraprim was increased a lot due high increase of price, and the slight decrease in the quantity sold, this will allow Turing pharmaceuticals to fund its research and develop new and more effective drugs as well as increase the average wages of its employees. This pleases most employees and managers due to wages increase, and most of people in the community as new employees will be hired to research new drugs, and most costumers will not be impacted by the price increase, yet a small number of costumers who pay for their treatment by their own will fall under a lot of hardship due to extreme price change. This is the main disadvantage of the price increase, as customers who do not have insurance or governments willing to pay for their treatments, may not be able to get appropriate treatment and their lives may be the
(∆%Qd /∆%P is <1)
Turing pharmaceuticals bought legal rights to a drug by the name Daraprim, they then increased its cost by 5000%, stating that it was necessary to fund research to create better drugs, than their 62-year-old drug Daraprim, they also stated that this will not be a problem to its main costumers, who are insurance companies and governments.
Daraprim is drug that is very PED inelastic …show more content…
Proportion of the consumer’s budget, this means if the product is very expensive can takes large portion of the consumer’s budget its then very likely to be elastic.
3. Degree of necessity, this means if the product is unnecessary or a luxury then its very likely to be elastic.
4. Duration of price change, this means price change in the long run tend to be elastic, as consumers are capable of finding substitutes or changing their behavior.)
Daraprim has no competitors in the USA, and one pharmaceutical company can purchase full legal rights, this means one pharmaceutical company can have monopoly over the market, which translates to them having total control over the price. Daraprim’s main costumers are governments or insurance companies, these costumers tend to have very larger budgets, and the price Daraprim is then a small proportion of their budget. Daraprim is a necessary drug to treat Toxoplasmosis (a parasitic disease) in patients with weakened immune system Eg. AIDs patients, this means is a very necessary product. Daraprim’s price change happened overnight, making the duration of the price change very short run. These four factors make Daraprim a very inelastic product, meaning that price changes will cause very slight change in quantity …show more content…
The Total revenue of Turing pharmaceuticals from Daraprim was increased a lot due high increase of price, and the slight decrease in the quantity sold, this will allow Turing pharmaceuticals to fund its research and develop new and more effective drugs as well as increase the average wages of its employees. This pleases most employees and managers due to wages increase, and most of people in the community as new employees will be hired to research new drugs, and most costumers will not be impacted by the price increase, yet a small number of costumers who pay for their treatment by their own will fall under a lot of hardship due to extreme price change. This is the main disadvantage of the price increase, as customers who do not have insurance or governments willing to pay for their treatments, may not be able to get appropriate treatment and their lives may be the