It is observed that countries like the US invest in the research and development of new

drugs, giving rise to monopoly like situation to their pharmaceutical industry when a

new medicine molecule is innovated. This may continue for about five years. Later,

during the next five years, pharmaceutical firms in countries like India either imitate this

innovation or invest in similar research and development of substitute drug molecules.

At the end of such time period, countries like India are in a position to produce a close

substitute to the original medicine at a much lower cost. Production picks up over time

and then the firms from the imitating country capture the international market.

Explain the process of international trade between innovating country and imitating

country with an appropriate diagram, showing the timeline (in number of years)

across various phases on the X-axis. Assume that each stage lasts for about five years.