Characteristics of Insulin and Aspirin
For this assignment, you will compare the characteristics of two important healthcare products – insulin and aspirin. Answer the following questions (roughly 2 pages total, not including any graphs you might include). Please number each answer to coordinate with the appropriate question. Submit your answers in a Word document once complete.
- Provide a short description of each product.
- How would you describe the demand for each product? Is demand elastic/inelastic? Is it a necessity/luxury? Does it have complements / substitutes?
- For each product, identify one factor that might shift demand for the product. Explain briefly how the factor influences demand for the product.
- For each product, identify at least one fixed cost of production. Explain why it is considered a fixed cost.
- For each product, identify at least one variable cost of production. Explain why it is considered a variable cost.
- For each product, identify one factor that might shift the supply of this product? Explain briefly how this factor influences supply of the product.
Insulin describes an hormone produced by the pancreas that regulates blood sugar levels while aspirin is a common pain reliever and anti-inflammatory drug. The demand for insulin is inelastic as it is a necessary drug for individuals with diabetes to regulate their blood sugar levels. It has no close substitutes and the demand is relatively constant. The demand for aspirin is elastic as it is considered a luxury drug with numerous alternatives available in the market. Its demand increases with rising disposable income, but decreases with an increase in price. Besides, insulin is major factor that shifts demand for insulin is changes in the population’s health and prevalence of diabetes. An increase in the number of people with diabetes leads to an increase in demand for insulin. Aspirin changes in alternative pain reliever options available in the market can shift demand for aspirin. For example, if a new pain reliever with better efficiency is introduced, it can lead to a decrease in demand for aspirin.
Further, the development and research costs of insulin are considered a fixed cost as they need to be incurred regardless of the quantity produced. These costs are sunk and cannot be recovered if production is ceased. The cost of building a factory to produce aspirin is considered a fixed cost as it needs to be incurred regardless of the quantity produced. The cost of raw materials and labor used in the production of insulin are considered variable costs as they vary with the quantity produced. While the cost of packaging materials and advertising expenses for aspirin are considered variable costs as they vary with the quantity produced.
Additionally the changes in the availability and cost of raw materials used in the production of insulin can shift its supply. For example, if the cost of raw materials increases, the supply of insulin will decrease. The changes in technology used in the production of aspirin can shift its supply. For example, if a more efficient production method is introduced, it can lead to an increase in supply of aspirin.
