Elasticity in demand and supply in pharmaceutical industry

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Elasticity in demand and supply in pharmaceutical industry

The degree to which demand or supply reacts to a change in price is called elasticity. Elasticity varies from product to product because some products may be more essential to the consumer than others. Demand for products that are considered necessities is less sensitive to price changes because consumers will still continue buying these products despite price increases.

On the other hand, an increase in price of a good or service that is far less of a necessity will deter consumers because the opportunity cost of buying the product will become too high. A good or service is considered highly elastic if even a slight change in price leads to a sharp change in the quantity demanded or supplied.

Usually these kinds of products are readily available in the market and a person may not necessarily need them in his or her daily life, or if there are good substitutes.

For example, if the price of Coke rises, people may readily switch over to Pepsi. On the other hand, an inelastic good or service is one in which large changes in price produce only modest changes in the quantity demanded or supplied, if any at all.

These goods tend to be things that are more of a necessity to the consumer in his or her daily life, such as gasoline.

Elasticity in demand and supply in pharmaceutical industry

To determine the elasticity of the supply or demand of something, we can use this simple equation: If it is less than one, the curve is said to be inelastic. As we saw previously, the demand curve has a negative slope. If a large drop in the quantity demanded is accompanied by only a small increase in price, the demand curve will appear looks flatter, or more horizontal.

People would rather stop consuming this product or switch to some alternative rather than pay a higher price. A flatter curve means that the good or service in question is quite elastic. Meanwhile, inelastic demand can be represented with a much steeper curve: Elasticity of supply works similarly.

If a change in price results in a big change in the amount supplied, the supply curve appears flatter and is considered elastic.

Elasticity in this case would be greater than or equal to one. The elasticity of supply works similarly to that of demand. Remember that the supply curve is upward sloping.

If a small change in price results in a big change in the amount supplied, the supply curve appears flatter and is considered elastic. The good in question is inelastic with regard to supply.

This means that coffee is an elastic good because a small increase in price will cause a large decrease in demand as consumers start buying more tea instead of coffee. However, if the price of caffeine itself were to go up, we would probably see little change in the consumption of coffee or tea because there may be few good substitutes for caffeine.

Most people in this case might not willing to give up their morning cup of caffeine no matter what the price.

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We would say, therefore, that caffeine is an inelastic product. While a specific product within an industry can be elastic due to the availability of substitutes, an entire industry itself tends to be inelastic.

Usually, unique goods such as diamonds are inelastic because they have few if any substitutes. Necessity As we saw above, if something is needed for survival or comfort, people will continue to pay higher prices for it.

For example, people need to get to work or drive for any number of reasons. Therefore, even if the price of gas doubles or even triples, people will still need to fill up their tanks. Time The third influential factor is time.Powered by rising demand worldwide for medical services, healthcare private equity activity soared in Tailoring Production to Demand at Pfizer The company s manufacturing facility in Freiburg, Germany, uses an approach that maximizes flexibility and segmentation By Colin Seller, Pat Field, Dr.

Andreas Werner, Gereon Schepers, Frank Lesmeister. The pharmaceutical industry is important because it is a major source of medical innovation. The U.S. research-based industry invests about 17 percent of sales in R and D, and R and D drives performance of individual firms and industry structure.

INDIA. On the domestic front, India remained the fastest growing major economy in the world, after surpassing China last year. Gross Domestic Product growth rate was % for FY , supported by strong consumption growth and government spending. About FTI Consulting. FTI CONSULTING is an independent global business advisory firm dedicated to helping organizations manage change, mitigate risk and resolve disputes: financial, legal, operational, political & regulatory, reputational and transactional.

IntroductionOn the occasion of the publication of the 50th volume of our illustrious journal, it is important to recall the major changes of the pharmaceutical field in the last 50 years.

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