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Puspa Gautam

Professor: Kerry

Microeconomics

Date: 4/30/2017

Reflection

I was bit nervous when this class was started. I didnt know what I am going to learn. I was

thinking in more complicated way about microeconomics. But, as the course went on I felt come

comfortable about the concepts of the Microeconomics. It taught me more about price. Price

doesnt necessarily mean it is related to money, but time, resources or even entertainment.

Surprisingly, these all are opportunity cost, where we take one as an importance and give up the

others. Other interesting topic like was the market equilibrium through the demand and supply

graph, which helps to calculate the maximum profit. I cannot stop this reflection here without

sharing what I learned from the market structures. Monopolistic, Oligopoly, Perfect competition

and Monopoly are the one I learned in detailed. I was not aware why/how prices are different in

different market. But, now I can easily interpret why the prices different in different stores. Now

I am really aware the market structure like Oligopoly, like we read in the class cell phone stall

has the same product but they each price it differently. This taught me to be more aware to buy

products as there could be chance of getting cheated off. Other structures had also taught me the

different areas on consuming the products. Thank you, Kerry for making this class so meaningful

and informative.
Eportfolio paper- EpiPen

Many people rose the concerned even too many politicians about the high cost of EpiPen, a life

saving device for people with severe allergies. The maker of the EpiPen has been raising the

price of the drug by about 25% per year for nearly a decade even through the drug is officially a

generic brand, thus, might be expected to be affordable. The reason that Mylan has been able to

consistently raise the price of its EpiPen is that nobody else sells one in U.S. The U.S is lacking

EpiPen competitors, one possible competitor was approved, but then had to recall their products.

So, Mylan took the advantages of this, charges the high price. As this is the lifesaving drugs,

there was no changes in quantity demanded of EpiPen even with the increase in price.

Mylan holds a patent on a type of design that meets specific legal requirement hoisted upon

schools for auto-injectors. Mylan, therefore, exploits this. The FDA is barring competing

companies that do manage to meet the same technical requirements by recalling their offerings

based on higher standards than set for EpiPen. Taking this information into account, it becomes

pretty quickly that FDA regulations customized to Mylans already established brand and design

is causing a monopoly to form around the companys offering. Thus, far the competing

companies to Mylan have been given excuse as to why products cannot see equal footing in the

market. Government has created the monopoly position that Mylan holds with EpiPen. The

government regulations have made it more difficult for competitors to enter the market and

produce an EpiPen like product. There is no existence of substitutes for the EpiPen meaning the

closer the substitutes and the more substitutes there are, the more elastic is the demand. Even

though Mylan countered a firestorm of criticism over its pricing of life saving EpiPen, saying it

would help more patients cover their out-of-pocket costs. But the drug makers didnt lower the
list price, and its stranglehold on the market means it is unlikely to face competitive pressure to

do so.

Price elasticity of demand is a measure of the relationship between a change in the quantity

demanded of a particular good and change in its price. The degree to which the quantity

demanded for a good change in response to a change in price can influence by number of factors.

Factors include the number of close substitutes. For example, demand is more elastic if there are

close substitutes. Inelastic is used to describe a good whose quantity demanded is highly

insensitive to price. Price is responsive to quantity demanded and vise-versa. This theory makes

the equilibrium price and market balanced the price. But there are some goods that we must

maintain our day-to-day life (water, electricity), there is a chance in quantity demanded even

with substantial changes in price. This is the monopolist power. Monopolist is the single supplier

of a good or service for which there is no close substitute. Its the constitutes entire industry. In

this market structure, the industry and the firms are same. The determinants of the price elasticity

of demand depends like quantity of substitutes, numbers, close existence, and length of the time

that allow for the adjustment to change the price of the products. While its accurate to describe

EpiPen as inelastic. I think this is the reason why Mylan could substantially raise prices on and

the near oligopoly of the of the pharmaceutical industry there are significant barriers to entry for

the companies seeking to create lower cost alternatives.

A free market requires no barriers to entry and unfortunately EpiPen market has a couple major

ones.

a) The EpiPen manufacturer, has multiple patents on EpiPen


b) The FDA has a very costly and stringent approval process for new pharmaceuticals.
These barriers to entry make it difficult for substitutes to enter the market. Economic of scale is

also the factor of barrier in the monopolist market. These barriers to entry have essentially given

Mylan a monopoly on their products. But I think the real question here is whether we need more

or less government intervention. If the government established price ceilings, and capping profit

margins, the government could keep these companies that have essentially established a

monopoly on a drug from overcharging a life-saving treatment while still allowing them maintain

profit. I think the social regulation should more regulatory role in controlling monopoly market.

Social regulation is applied in entire economy sectors. Its the social regulation that makes the

quality life through specialized and advance products, clean environment, and smooth working

environment. Economic regulation applies on natural monopolies and non-monopolistic

industries. But, Mylan achieved the rights to EpiPen from 2007 and went on to hike the price of

the injector from $ 100 in 2007 to nearly $700 in 2016, a nearly 550 % increase in about 9 years.
Pharmaceutical giant Mylan has raised the price of the EpiPen more the 500 % on the last 6

years in the above chart. This is the huge changes in the price, leaving parents shocked and

scrambling to buy the injection device for children with life-threating allergies. National

Childrens Hospital Dr. David Stuckus said in the Wall street Journal.
Citation

Carolyn Y. Johnson and Catherine Ho, How Mylan, The Maker of EpiPen, Became a Virtual
Monopoly. The Washington Post August 25, 2016

https://www.washingtonpost.com/business/economy/2016/08/25/7f83728a-6aee-11e6-ba32-

5a4bf5aad4fa_story.html?utm_term=.7bd96c738986

Micah J. Fleck. Web. thelibertaianrepublic.com/epipen

Jonathan D. Rockoff Web. The wall street Journal

Web. Elsevier Gold Standard Drug Database

RogerLeRoyMiller. Economics Today: The Micro View, 18th Edition. Pearson, 2015