Microeconomics – Prescription Medications

Microeconomics – Prescription Medications

Topic: Prescription Medications

Critically analyze the pros and cons of putting a price ceiling on prescription medicine. Make sure to use concepts from the chapter in this unit such as government intervention, inefficiencies, price elasticity, etc. in your answer.

In the first case, assume the medication is for a life threatening illness for which your child has been diagnosed.
In a second case, assume the medication is for an improved quality of life issue, such as achieving a healthy weight.
What are the impacts that the pharmaceutical company that makes the medications in question will experience? How will that affect the pharmaceutical company’s production decisions? What about its decisions to conduct further research into new drugs?

Solution Preview

A price ceiling is a process to which the government controls its prices and limits how high the amount can get as to the product in question. The price ceilings are used to protect the consumers from circumstances that would make those commodities very expensive. The price ceiling, therefore, affects supply and demand (Price, 2006). 

(624 words)