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Economics is the science of making decisions in the presence of scarce resources. Decisions are important because scarcity implies that there is a trade off involved between alternatives: by choosing one, you give up the other. Economic decisions thus involve the allocation of scarce resources, with the driving forces of supply and demand which comprise a market economy (Chrystal & Lipsey, 1999).
An article dated November 29, 2006 in the Online Journal talks about the US government’s efforts to generate demand for the products of the psychiatric/pharmaceutical industry. At the time it was expected that the government would soon launch a large scale advertising campaign on television, print media as well as radio, targeting people in the age bracket of 18 and 25. The objective of the campaign as formally stated would be to “encourage, educate and inspire 18-25-year olds to step up and support friends they know are experiencing a mental health problem.” But this writer had doubts whether this was actually the intent of this marketing effort (Warner, 2006).
The writer felt quite certainly that through these ads the government wanted to “create customers” for this industry which saw a lot of potential in the above mentioned age bracket for psychiatric drugs and services. The government has started out its attempt to expand its market by first and foremost removing the stigma behind psychiatric illnesses and increase acceptance for chemical-imbalance induced mental problems. It will, through this campaign, inform people about the disastrous consequences of failing to seek professional medical help and the increase in medical illnesses. Hence, encouraging people to seek help, for themselves or for people around them will lead to an increase in the number of potential patients for this industry (Warner, 2006).
This according to the writer is a strategy on the government’s part to generate more demand and consequently, more sales for the psychiatric/pharmaceutical industry. This is an economic example of a rightward shift in the demand curve (Warner, 2006).
Movement along a demand curve is called a change in quantity demanded. A movement along the demand curve is caused by a change in the price of the good or service. For instance, a fall in the price of the good results in an increase in its quantity demanded. A shift of the demand curve is called an increase or decrease in demand and is caused by changes in other factors such as advertising, income, or price of related goods. A rightward shift of the demand curve is called increase in demand as more of the good is demand at each price while a leftward shift in the demand curve is called a decrease in demand (Baye, 2006).
The situation described in the article would cause an increase in demand as it is stimulated by an advertising campaign, not by changes in price. Had the price of these drugs increased or decreased, the movement would have been along the demand curve. The drug industry want to expand its market and the 18-25 year segment represents an untapped market with a lot of potential buyers who can be convinced to seek medical help for their issues. The government-backed advertising campaign thus plans on initially creating a mindset which does not consider psychiatric illnesses a stigma, and then go on to make them its customers. The supply of pharmaceutical drugs will remain unaffected as these drugs are already being manufactured and sold, albeit in lesser quantities. This move is an attempt to generate more demand by increasing awareness, reducing bias and encouraging treatment (Warner, 2006).
References
- Baye, M. (2006). Managerial Economics and Business Strategy. Singapore: McGraw Hill.
- Chrystal A., Lipsey, R. G. (1999). Principles of Economics. Oxford University Press
- Warner, R. (2006). Federal government launches marketing campaign for psychiatric industry.
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