Markup rule-computing price using elasticity

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Reference no: EM1348214

Your company has developed the drug called Matrox that is an effective treatment for migraine headaches. You have just discovered that it can also be employed for organ transplant patients to reduce risk of organ rejection. The demand for migraine medications is considerably more elastic than the demand for drugs to reduce 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 marginal cost is $5 per dose. Supposing you can price differently for the two different types of customers of the same basic drug, what would be the prices in the two markets?

Reference no: EM1348214

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