9. If the demand curve for Pfizer\'s Norvasc, a blood pressure medication, is mo

Question

9. If the demand curve for Pfizer's Norvasc, a blood pressure medication, is more elastic in Mexico than it is in the United States, how could Pfizer use this information to maximize their profits? They could segment the markets and charge a lower price for Norvasc in Mexico than in the United States. They could segment the markets and charge a higher price for Norvasc in Mexico than in the United States. Since Mexico is a poorer country than the United States, in this situation it makes more sense for Pfizer to charge only one price in both countries. They could choose to sell Norvasc only in the United States.

Explanation / Answer

If the demand curve for Pfizer's Norvasc, a blood pressure medication, is more elastic in Mexico than it is in the United States. That means a change in price in Mexico causes more change in quantity demanded for Pfizer's Norvasc than in United states.

Simply, if the price of Pfizer's Norvasc increases, then the fall in quantity demanded for Pfizer's Norvasc in Mexico is more than United States.

So, Pfizer could segment the markets and charge a lower price for Norvasc in Mexico than in the United States.

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