You are manager of a small pharmaceutical company that received a patent on a dr

Question

You are manager of a small pharmaceutical company that received a patent on a drug three years ago.Despite stronges sales(125milion last year) and a low marginal cost of producing the product ($0.25 per pill) your company has yet to show a profit from a selling drug.This is,in part due to fact that the company spent $1.2 biloin developing the drug and obtaining FDA aproval. An economist ha sestimated that at the current price of $1.25 per pill,the own pric elasticity of demand for the drug is -2.5.Based on yhis information,what can you do to boos profits?expain

Explanation / Answer

The elasticity of -2.5 shows that with a decrease in price by a single $, the quantity demanded will increase by 2.5 units.

To boost profits, prices can be cut down.

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