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The Case:

Pakistan has effervescent pharmaceutical industry. This industry meets around 70% of the country’s demand. With the increase in diseases overtime, the industry has also been widening up. Pakistan is one of the developing countries with low per capita income and high unemployment rate. Majority of the people are not being able to cure themselves from the various diseases due to higher prices of the medicines. Many new drugs are expensive because they are patented. This social welfare cost reduces the consumer surplus on one hand and increases the producer surplus on the other hand. These patents allow the producers to produce more and earn higher profits as no one else can produce the same medicine due to patents. These patents also allow the firms to innovate and invest more in the pharmaceutical industry. Government is facing the dilemma how to encourage innovation and efficiency in the pharmaceutical industry without social welfare cost.




Being an economist, what recommendations would you suggest to solve this dilemma?


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Replies to This Discussion

plz provide the solution to this ! this eco404 sucks ! :(


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