|INSTRUCTOR DISCUSSION NOTES:
Would You Like Fries With Your Antibiotics?
1. Why would CVS want to purchase such a retail clinic as MinuteClinic?
In a monopolistically competitive world of drug stores, this gives CVS a way to further differentiate its product from other stores that don't house a clinic. This creates greater convenience for the consumers, and may reduce the elasticity of demand for CVS' services.
2. What would you expect to see happening to the fees charged by doctors as a result of this new market niche?
This ultimately depends on elasticity. If demand is relatively elastic, then those fees charged by doctors will have to fall to remain competitive. But if there is a need to see a doctor above all else, reducing elasticity of demand, then there may be no need to reduce fees.
3. What external economic benefits may arise as a result of this new innovation in health care?
there may be an increase in efficiency, reduction in costs, increase in choice, and increase in information disseminated through the market.
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