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Price Controls: Prescribed Drugs in North America - Lesson Plan: 1 x 1 hour lesson

A series of 'off the shelf' lesson plans and resources for use in the classroom. This lesson deals with price controls and is relevant to the following specifications:

• AQA: AS Module 1, 10.6
• Edexcel: AS Unit 2
• OCR: AS Unit 2882, 5.2.2 and 5.2.3

Aim:

The lesson can be prefaced with a discussion about forms of government intervention. Issues relating to the Common Agricultural Policy and the Common Fisheries Policy will be dealt with elsewhere, so this lesson focuses on an example of price controls of prescribed drugs in North America.

The Activity briefly describes the issue - Canada has price controls for its prescription medicines whereas the USA does not. This has created a situation where the cheaper prices in Canada are being exploited by consumers in the USA. The case study highlights how intervention in one market will create distortions and lead to unanticipated effects on other markets. The impact of technology in making market information more freely available is also touched upon here and is a useful point for discussion in relation to the extent of the degree of perfection that now exists in many markets throughout the world!

Learning Objectives:

At the end of the lesson, students should:

• Understand the nature of price controls - both minimum and maximum prices
• Understand the impact of maximum prices below the equilibrium level on a market using diagrams to illustrate
• Understand how the effect in one market can have unintended effects in another market
• Appreciate the requirements for effective price discrimination in a market
• Appreciate the impact of the price elasticity of demand and supply on the outcome of price controls

Resources:

• PowerPoint Presentation - Government Intervention in Markets [190 KB]
• Mind Map - Government Intervention in Markets
• Activity - Price Controls: Prescribed Drugs in North America

Useful Links:

• Drug price controls don't work in Canada, either - from the National Centre for Policy Analysis (http://www.ncpa.org/oped/bartlett/may1700.html)
• Price controls can be lethal - from the Washington Times (http://www.washtimes.com/commentary/20031028-083515-6228r.htm)
• Price controls and overall drug spending - from the Buckeye Institute for Public Policy Solutions (http://www.buckeyeinstitute.org/article/228)

Lesson Structure:

The lesson assumes that some prior work has been done on the nature of intervention in markets. The Activity can be carried out as a whole class session with the educator leading the lesson and directing the feedback of the tasks or students can be left to work through the questions themselves, handing in their efforts at the end of the lesson.

There is scope for groups to work through the questions producing their answers on flip chart sheets and presenting their analysis to the rest of the class for discussion.

The final question leads students into an answer that requires a greater degree of higher order skills than the previous questions. This question can be used for homework to help reinforce the work covered during the lesson.