ECON 221 Chapter Notes - Chapter 5: Lifesaving, Zidovudine, Market Power
13 Aug 2018
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Total revenues and the elasticity of demand. When demand curve is inelastic, as price goes up a lot, quantity goes down by only a little. Revenue will go up when price goes up. Revenue will go down when price goes down. When the demand curve is elastic, as price goes up, revenue decreases. Hiv drugs are priced well above production costs because of. The you can"t take it with you effect (aids to market power) The other people"s money effect (aids to market power) Gsk, the world"s largest producer of aids drugs, owns the patent on combivir. A patent is a government grant that gives the power the exclusive rights. Gsk"s patent on combivir gives gsk market power, the power to raise price. A monopoly is simply a firm with market power. Competition will drive the price down to the marginal cost of production. Patents are not the only source of market power.
