Your Company Has Developed a Drug Called Matrox That Is

question 184

Essay

Your company has developed a drug called Matrox that is an effective treatment for migraine headaches.You have just discovered that it can also be used for organ transplant patients to reduce the risk of organ rejection.The demand for migraine medications is considerably more elastic than the demand for drugs to reduce the risk of organ rejections.A study has indicated that the elasticity of demand for Matrox as a migraine medication is -4.0 but as a transplant drug it is -1.5.The current price of Matrox is $10 per dose; the marginal cost is $5 per dose.Should you use a price discrimination scheme for this product in these two markets? If so,how should you price Matrox in each market? If not,why not? Show all calculations.

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Definitions:

Own Residence

The act of living in a housing unit that one owns, as opposed to renting from someone else.

Grandparents

The parents of a person's father or mother, playing significant roles in families through support, tradition, and wisdom.

Extended Family

A family group that extends beyond the nuclear family, including relatives such as grandparents, aunts, uncles, and cousins, often living close by or within the same household.

Nuclear Family

A family unit consisting of two parents and their children, living together as a single household.