ECO401 Economic GDB NO.1 Discussion and solution Fall 2013 start date.12.nov.2013 end date13.nov.2013The Case:Under competitive market structure, price is determined by the forces
of demand and supply. If the market is not competitive then government
intervention is required to settle the prices. Pharmaceutical industry
is one of the fastest growing industries in Pakistan dealing with health
business. The market of prescription medicine is not very competitive
because the company holds patent for a medicine and has a market power
that’s why pharmaceutical companies charge high prices for medicines.
People are bound to purchase the medicines at high prices. Most of the
current health reform debate agrees on the need to curtail health care
costs. Evidence of price ineffectiveness for health services is found in
the huge price variations that can be observed for similar services.
Requirement:
Being a student of economics, analyze the above case carefully and
suggest how the government can intervene in the pharmaceutical market to
curtail the pricing ineffectiveness. Discuss why people don’t decrease
the demand for prescribed medicines in spite of increase in medicine
prices.
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