Question

WRITE A ONE-PAGE REVIEW OF THE DRUG SHORTAGE “CRISIS” AND CURRENT EVENTS.

- Look up and understand the definition of prices. Understand how prices move to equate supply and demand in a capitalist economy. Look up and understand the definition of government price controls.

- Review at least two historical experiences with price controls. (gasoline in the 70s, rent controls from WWII to date, beef controls after WWII, Russia’s price controls, Cuba’s price controls, Venezuela’s price controls, etc.)

-

Answer 1

Drug shortages

It is situation in which a drug cannot meet the current need or the demand of the consumers. This has become a serious issue over the past few years all over the world. It has also affected the stakeholders as well as the healthcare workers. The causes of these drug shortage is basically the result of quality problems during the manufacturing process. Due to this a halt occurred in the production process. The drugs which had few competitors could not be disrupted by other companies as a result the demand outpaced supply. In 2012, legislation enacted that if there is any drug crisis then it should be notified to the Food and Drug Administration(FDA) about the change in production for which the supply of the drug is decreased. This has helped a bit but could not eradicate the problem completely.

Russia’s price control

Due to inflation, the Russians had to control the price and this led to shortages of food and consumer goods. Before and during the second world war this economy had suffered a lot from inflation. The official prices in the state stores increased moderately but the market prices in the firms increased more. This was eradicated but could not help for long. After the war the prices of the state and co operatives were controlled but it changed the scenario very little. This gave way to repressed inflation where the rising excess demand led to excess liquid assets in the hand of the population. As the production was controlled by the political parties , rising demand did not lead to greater supply and shortages prevailed in Russia. Due to this the standard of living of the Russians came down a lot.

Cuba price control

Cuba is trying to restore price control reforms to reduce the price of foods and other consumer goods. The prices went high because the production became limited, weather conditions were poor etc. the government is trying to modernize their economic models to uplift the condition of Cuba.