million of investment. If the firm could keep the social benefits of its investment for itself, its demand curve for
financial capital would be DSocial and it would be willing to borrow $52 million.

Rate of Return DPrivate (in millions) DSocial (in millions)

2%

4%

6%

8%

10%

$72

$52

$38

$30

$26

$84

$72

$62

$52

$44

TABLE 13.1 Return and Demand for Capital

Big Drug’s original demand for financial capital (DPrivate) is based on the profits the firm receives. However,
other pharmaceutical firms and health care companies may learn new lessons about how to treat certain

medical conditions and are then able to create their own competing products. The social benefit of the drug
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