Question
If insulin an inelastic good, raising the price will tend to lead to... a) higher costs. b) lower revenue. c) higher revenue. d) lower costs.
Ask by Tran Ramirez. in the United States
Feb 24,2025
Upstudy AI Solution
Tutor-Verified Answer
Answer
Raising the price of insulin, an inelastic good, will lead to higher revenue.
Solution
If insulin is an inelastic good, this means that its quantity demanded does not decrease significantly when the price increases. Therefore, when the price is raised, the small drop in quantity demanded is outweighed by the higher price, leading to an increase in total revenue. The correct answer is:
c) higher revenue.
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Simplify this solution Mind Expander
Raising the price of insulin, an inelastic good, means that the quantity demanded will not significantly decline because many people with diabetes depend on it for their health and well-being. Therefore, if the price goes up, the revenue generated from sales will likely increase, as consumers will continue to purchase approximately the same amount despite the price hike. In practice, this creates a challenging situation where pharmaceutical companies might see higher profits, but it also raises ethical concerns about accessibility and affordability for patients who need insulin to survive. Understanding this dynamic can help policymakers address essential health care issues.
