Price cap on stents in India

Part of the syllabus: Microeconomics
Source: The Economic Times India
Date of the article: 2016-07-20
Link to article: India sets a maximum price on stents
A great Microeconomics IA article for you. Price ceiling is introduced on stents in India – how will this affect the market for stents? What about the fact that they will become more attainable to everyone… Could that lead to positive externalities associated with better healh?

Talking points for your Internal Assessment:

  • Defining what is a price cap/maximum price/price ceiling is essential and that should be done right away.


  • Following the definition of the price ceiling a diagram could be a good idea. After the diagram – a full explanation of what will happen to the market of stents in India after the maximum price is introduced.


  • If you want to go one step further – you could argue that stents improve health (quote the article e.g. lower chances of a heart attack) and this a positive externality. Healthier society – more efficient workforce, etc. Obviously if you choose this – a positive externality diagram would be useful. Yet, if you do not want to do that from the start you can leave this point for the evaluation part of your IA.


  • See the part of the article talking about the high profit margins of stents as well as private hospitals being affected by the price ceiling. Lower profits – lower quality? Lower profits – less research and development or less training? Hundreds of ways to twist this! It is even possible to use theory of the firm and a diagram from that part of the syllabus. Think which market structure would best represent this situation (and explain your choice in the IA!)


  • Limitless evaluation possiblities: possible positive externalities arising from better health of citizens, effects on (local) stent producers, effects on public and private hospitals.
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