Eco 100 Assignment 1

Annually, the US spends $300 billion dollars on pharmaceutical drugs. This is due to the over-diagnosing of certain conditions. Everyday, Americans are exposed to an enormous amount of advertisements for medications of all kinds. For example, 1 in 10 Americans are taking

In recent years, prescription drugs spending has been one of the most rapid rising components in the healthcare industry. In 2008, prescription drugs spending

With soaring medication prices, many drug manufactures have the aspiration to increase profits, which have the effect of rising drugs cost and concerning for Americans. Fortunately, both Democrats and Republican have illustrated interest in passing Prescription Drug Affordability Act of 2015. Captivatingly, the act will allow Medicare to consult manufacturers and set affordable prices. Many have also requested to allow of purchasing medication from Canada which currently has lower drug cost. Reports often appear in the popular press about American consumers who go to Canada or Mexico to buy their prescription drugs at a fraction of what they would pay in U.S. pharmacies, even though doing so is illegal (1). By contrast, the United States leads

4) Use an example to discuss why demand tends to be relatively elastic in a situation where “Availability of Substitutes” exists.

The purpose of this paper is to address the state of prescription drugs within today’s society, as it relates to areas of development, approval, cost, and competition. There will be look at the benefits, such as continued research may lead to the development of new breakthrough prescription drugs. On the opposite end, there is an in-depth look at the controversies that surround the prescription drug industry. These include the many, often severe side effects that accompany many of these drugs, and how they are allowed to make it past FDA approval, as well as, a look at the rising cost of prescription drugs. Tied with the increasing cost, is a comparative look at the similarities and differences of brand name drugs versus their

“At any time in the last 2 years have you ended up taking less medication that was prescribed for you because of the cost?” Does this sound familiar to you? Independent variables include prescription drug coverage, demographic characteristics, several measures of health status, and monthly out-of-pocket spending on prescription drugs.

According to Consumer Report in September, 55 percent of Americans took at least one prescription drug (Carr, Rabkin, and Skinner 27). Interestingly, in 2008 it was only 48 percent; a breakdown of age groups showed 90 percent of adults at least 60 years old and 20 percent of children were taking at least one prescription drug and ten percent over all age groups were taking at least five prescription drugs (Qiuping, Dillon and Burt 6). That is over 300,000 additional people with prescription each year. Furthermore, many new drugs being prescribed in the United States are no more effective than the cheaper predecessor; these new drugs just cost more (Abramson). If the new drugs that are predominately being prescribed are no more effective and the cost has increased, it can only be assumed Americans are

The increasing expenses of physician prescribed drugs influence the patients who get them and the

Expenses of medication continue to increase. The expenses of both types of medications, brand-name or generic, still continues to escalate. Even though, pharmaceutical industries may consider the trend as a chance to rise revenue, payers are anticipated to start pushing back (Barnet, 2014). Medications is of the main reasons for the increase of medical care expenses. Rising expenses for medication placed a heavy financial burden on patients who have to have lifesaving medicines in addition to the overall United States health care system. Therefore, we are left having to fork the bill and pay for the expensive medications with higher premiums, out of pocket expenses, or pay both of them. In the United States, the expenditures on prescription

spending since 1960, both as a share of GDP and as a share of total health spending. It

II. When price falls from 4 pounds to 3 pounds the demand for travel increases to 80,000 units- At the original market price of 4 pounds the demand for travel was 60,000 units generating revenue of 240,000 pounds. When the price is reduced to 3 pounds the resulting demand is 80,000 units and this also generates income of 240,000 pounds. When market price changes and the resulting revenue remains the same it can be said that price elasticity of demand is unitary in

Based on the above description, forms of elasticity will affect business decisions and pricing strategies differently depending on the nature and type of products or services being offered. Business organizations whose product offerings have elastic and perfectly elastic price elasticities of demand should not attempt to raise prices of their products because it will cause the quantity demanded and consequently total revenues to drop drastically. Businesses can there use the price elasticities of demand to determine whether the proposed changes in their prices will raise or reduce their total revenue. The following expression may be useful in helping business organizations to determine the impacts of elasticities on their total revenues based on the suggested price changes.

2. Analyze how prescription drugs affect the demand and supply of other products and services in this country.

Explain the relationship between the price elasticity of demand and total revenue. What are the impacts of various forms of elasticities (elastic, inelastic, unit elastic, etc.) on business decisions and strategies to maximize profit? Explain using empirical examples.

Recall that the elasticity of demand, which measures the responsiveness of demand to price, is given by