Note: This is post #47 in a weekly video series on basic microeconomics.
AIDS has killed more than 36 million people worldwide, notes economist Alex Tabarrok. There are drugs available to treat AIDS, but the price in the U.S. of one pill is 25 times higher than its cost. Why is this life-saving drug so expensive?
In this video by Marginal Revolution University, Tabarrok shows how patent rights have created a monopoly in the U.S. market for AIDS medication, causing pills to be very expensive. In other countries, however, such as India, which does not recognize patents on AIDS medication, prices remain low. Using this example, Tabarook shows how monopolies use market power to increase prices.
(If you find the pace of the videos too slow, I’d recommend watching them at 1.5 to 2 times the speed. You can adjust the speed at which the video plays by clicking on “Settings” (the gear symbol) and changing “Speed” from normal to 1.25, 1.5 or 2.)