Economics

2. (10 points) (a) As long as a prescription drug is under patent, the company has a monopoly, and no one can copy the drug. When the patent expires, generic manufacturers can copy the drug legally. What impact does the patent expiry have on the price elasticity of demand for the drug? Please give an explanation. (b) When the price of butter was "low," consumers spent $5 billion annually on its consumption. When the price doubled, consumer expenditures increased to $7 billion. Is demand for butter elastic or inelastic? Please explain