Monopolistic Competitive Market Structure And Elasticity Essay

Monopolistic Competitive Market Structure And Elasticity Essay

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Over the past few years the price of pharmaceuticals has been increasing at an alarming rate. Drugs such as Daraprim, which treats parasitic infections, have had startling price increases. One even increased as much as fifty times the original price in one night (Sachs, 2). These price increases have led to an increased call for healthcare reform. The microeconomics class I took last semester has helped me to understand some of the proposed reforms such as those suggested in California and Ohio. These states are considering enacting a price ceiling on all pharmaceuticals sold within the state 's boundaries which could lead to a shortage of various prescription drugs. The purpose of this paper is to explain the monopolistic competitive market structure and elasticity because they helped me understand “How to Bring Down Drug Prices Post-Election: Reforms have been proposed at the federal and state level”, by Rachel Sachs.
Ideally the pharmaceutical industry would have a monopolistic competitive market structure. There would be the brand name drug with several generic versions available, all performing the same function biologically while all being slightly different. Entering or exiting the industry would be simple and inexpensive. This would lead to a large number of independent firms, each holding a small market share. Although all of the products would be basically the same there would be slight differences like the types of fillers used and each firm would be pushing its product for its differences through advertising or sales promotions. These slight or suggested differences give the firms some leeway when setting prices. But unlike the products of a monopolistic industry the firm does not have complete control over the price t...

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...a necessity, the slope of the line will be positive.
The microeconomics class I took last semester helped me to realize that political actions have a profound impact on the economy and the repercussions should be thought about before enacting any policy on any industry. Whether on the pharmaceutical industry or the automotive industry the changes must be thought of form an economic perspective viewing and weighing the costs and benefits for each choice made. A minor change in price could lead to a major change in the quantity desired by the populace. Considering the amount of competition, how easy it is to change to or from, necessity, and overall cost should be put first in almost all decision making. This microeconomics class has helped me to further develop my critical thinking, logic, and decision making skills which I hope to use again many times in the future.

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