Question
Martin Shkreli (called by some people the 'Most-Hated' CEO in the world) is the founder and was the chief executive of Turing Pharmaceuticals. In September
Martin Shkreli (called by some people the 'Most-Hated' CEO in the world) is the founder and was the chief executive of Turing Pharmaceuticals. In September 2015, he raised the price of the drug Daraprim to $750 a tablet from $13.50 (overnight!), bringing the annual cost of treatment for some patients to hundreds of thousands of dollars. Daraprim, known generically as pyrimethamine, is used mainly for people with compromised immune systems, like AIDS patients and certain cancer patients. Assume that the quantity demanded for this good was one million tablets per year(Q1) whenthe priceforeach tabletwas$13.50.(Throughoutthisquestion, usethestandardmethodof computing elasticities.)
a. What is the minimum expected quantity demanded (Q2) that still reasonably justifies this price increase (if the objective is to increase revenue)? (2 pts)
b. What is the maximum percentage change in the quantity demanded (which in fact indicates a reduction in the quantity demanded) that still justifies this price increase? (2 pts)
c. Obtain the maximum numerical value of the price elasticity of demand that still justifies this price increase. (2 pts)
d. Roughly speaking, what type of demand curve do you call a demand curve with this numerical value for its elasticity? Is this a common type of demand curve that you normally expect to see for vital drugs like Daraprim? (1 pt)
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