Novo Nordisk Will Cut Some U.S. Insulin Prices By Up To 75% Starting Next Year

EconEye Admin

3 years ago

Novo Nordisk will slash insulin prices next year, following a path set by rival Eli Lilly. Patients have long called for insulin price cuts. High insulin prices force many people to ration doses, which can be dangerous for their health. Insulin prices have more than tripled in the last two decades. —npr.org

Answer the following questions to check your understanding of the story.

Is the demand for insulin elastic or inelastic? Why?

The demand for insulin is _____________.

a) inelastic because it has few substitutes

b) inelastic because its price has changed recently

c) elastic because it has few substitutes

d) elastic because it is a necessity for people with diabetes

Wrong! - When the price of insulin changes, does the quantity of insulin demanded change by a relatively large amount or a relatively small amount? Is the demand for insulin inelastic or elastic?

Good Job! - The demand for insulin is inelastic. It has few substitutes, so when the price of insulin changes, the quantity of insulin demanded changes by a relatively small amount.

How will the total revenue of a firm that produces insulin change when the price falls?

Total revenue will ____________ because the percentage increase in quantity demanded is ____________ than the percentage decrease in price.

a) decrease; greater

b) increase; greater

c) increase; smaller

d) decrease; smaller

Wrong! - The demand for insulin is inelastic, so what is the relationship between the percentage increase in the quantity demanded and the percentage decrease in price when the price falls? Does total revenue increase or decrease?

Correct! - The demand for insulin is inelastic, so when the price falls the percentage increase in the quantity demanded is smaller than the percentage decrease in price, and total revenue decreases.

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