An increase in the price of a newly developed flu vaccine from $10 to $15 per vial reduced the quantity demanded from 200,000 to 180,000 vials per week.

1)What is the price elasticity of demand for this vaccine?Is demand elastic, inelastic or unit elastic?Why?Interpretthe meaning of the computed price elasticity.

2) Suppose the government was successful in encouraging drug manufacturers to reduce their new price by 20%, how much would quantity demanded be at the new price?Does consumer spending increase, decrease or remain the same?Explain.

3) Suppose that there is only one supplier of the vaccine in the market and supply is fixed by the production capacity of that manufacturer, which is 200,000 vials per week. What would be an estimate of the elasticity of supply under this condition?