Final Assignment Essay

ESSAY ON COMPETITIVE
MARKET FOR HEALTH
CARE GOODS AND
SERVICES (AUSTRALIA)

Table of contents
INTRODUCTION……………………………………………….3
MARKET OVERVIEW………………………………………………………………….3
MARKETSTRUCTURE………………………………………………………………….3
Assumptions……………………………………………………………………………………….4 Concept of average ,marginaland total revenue……………………………………..4 Equilibrium conditions………………………………………..............5.
PHARMACEUTICAL MARKET……………………………………….8
COST STRUCTURE IN THE MARKET……………………………….9
CONCLUSION…………………………………………………………..10
REFERENCES…………………………………………………………..10

INTRODUCTION

In the current economic scenario, it is marked that in health care system competition is increased dramatically. After globalization, the industries have to face intense competition from local as well as global competitors. High competition is found in countries like USA, Germany, Japan.In the health care industry, pharmaceutical market is judged to be highly competitive industry. With the development of science and technology pharmaceutical industries are growing and its going into a new way of development. In the following essay a whole analysis is made on the pharmaceutical market in Australia and additional investigation is done whether the pharmaceutical industry is perfectly competitive or not.

MARKET OVERVIEW

Australian Pharmaceutical industry is extremely developed industry with large number of exports accounting to 3.9 billion USD in 2012-2013 and the number of imports amount to about 10.508 billion USD in 2012 -2013. Its adds to about30.79%of GDP in Australia(World Bank Group,2015).This market employs a large number of people and at present it employs 15.463 people in the manufacturing sector. The turnover of entire pharmaceutical industries is 23.4 billion USD.The top companies are Alphapharm, Pfizer and AstraZeneca etc. Alphapharm has the maximum share of 13% at the same time as AstraZeneca has a share of 11%.On the other hand, in pharmaceutical sector 9% of the share is of Pfizer (Financial Times,2015).

MARKET STRUCTURE
Market can be described as a place where the interaction of sellers and buyers takes place through medium of exchange. There are different type of markets for instance Monopoly,Oligopoly,Perfect competition etc.At this point we believe that pharmaceutical industry as perfectly competitive, so a discussion should be made on the assumptions ,market structure and equilibrium condition of this type of competitive market(Frank ,Bernanke and Johnston,2013).
Assumptions
1. Firm is a price taker for the reason that it suppose the market price to be given. If price taker is the seller it can sell whichever amount of product at a given price.
2. Existence of large number of buyers and sellers.
3. There is free entry and exit of the new firms
4. Firm produces profit in long run whereas in the short run it earns losses.
5. No externality is faces by a firm in this type of market structure.
6. There is no pressure for government regulation to build a market competitive.
7. Here the goods are considered to be homogenous .Therefore the firm won’t able to charge different prices other than the market prices.

Concept of Average Revenue, Marginal Revenue and Total Revenue

Total Revenue –Total Revenue is characterized as the total receipts which achieved from total sales of goods and services of a given quantity.
Average Revenue-It is evaluated as the total revenue divided by per unit of output. Average revenue equals to the price of a particular product .i.e AR=PQ/Q where P is the price and Q is the quantity of the output. AR curve is horizontal in the perfectly competitive market.
Marginal Revenue-Selling of extra unit of goods and services is called marginal revenue. Marginal revenue is the additional revenue. It equals to the change in the total revenue by the change in the increase in output.

The following diagram shows the quality between AR and MR curve

MC
MS

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