Vaccinations reduce other people\'s exposure to communicable diseases. Suppose t

Question

Vaccinations reduce other people's exposure to communicable diseases. Suppose the market demand for vaccinations is Q = 100-1OP where Q is millions of vaccinations and P is the price per vaccination. The market is competitive and the supply function is Q = 2P -8. What is the market equilibrium? Calculate and sketch your answer. Do you think the market allocation is efficient? Why or why not? If not, what type of market failure is this? Be as precise as you can. Suppose the marginal external benefit of vaccinations arc MEB = 8 - 15Q. What is the efficient price and quantity? Calculate and sketch your answer. m What is the DWL of the market allocation? Calculate and Illustrate. What is the optimal Piguovian subsidy? What is the incidence of the subsidy?

Explanation / Answer

a. Setting Qd=Qs:

100-10P=2P-8

P=9

Substituting the value of P in Qd:

Qd= 100-10(9)

Qd=10

Therefore equilbrium price=9 and quantity=10

b. We can substitute the equilibrium quantity :

MEB= 8- 0.15*(10)

MEB=6.5

Therefore efficient price is 6.5

Efficient quantity:

MEB=inverse of supply chain function

8-0.15Q=4+0.5Q

Q=6

Related Questions

Navigate

• Browse (All)
• Browse V
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.