Suppose that a new drug has been approved to treat a life-threatening disease.Demand for that drug is shown on the graph below.Prior to approval of this drug,the only treatment for this condition was non-prescription pain relief.Demand for one brand of non-prescription pain reliever is also shown on the graph below.
Refer to the figure above.The main reason for the difference in the slopes of the demand curves is that:
A) one drug has many substitutes and the other does not.
B) one drug is new on the market and the other has been available for a long time.
C) one drug is heavily regulated by the Food and Drug Administration and the other is not.
D) one market is in equilibrium and the other is not.

Question

Suppose that a new drug has been approved to treat a life-threatening disease.Demand for that drug is shown on the graph below.Prior to approval of this drug,the only treatment for this condition was non-prescription pain relief.Demand for one brand of non-prescription pain reliever is also shown on the graph below. 
Refer to the figure above.The main reason for the difference in the slopes of the demand curves is that:
A) one drug has many substitutes and the other does not. 
B) one drug is new on the market and the other has been available for a long time. 
C) one drug is heavily regulated by the Food and Drug Administration and the other is not. 
D) one market is in equilibrium and the other is not.

Quizplus · Accepted Answer

The presence or absence of substitutes affects the price elasticity of demand.

Suppose That a New Drug Has Been Approved to Treat