the supply of measels vaccines is given by Q=450*P. The demand for measles vacci
ID: 1202996 • Letter: T
Question
the supply of measels vaccines is given by Q=450*P. The demand for measles vaccine is given Q=20,000-50*P. A. what is the market equilibriumprice and quanity? B. The demand curve implies that private willingness to pay is P=400-Q/50. However ecternal benefits are associated with each measles vaccination, so the social deman curve is Q=20,000-50*(P-5). What are the equilibrium price and quanitiy if these external bebenfits are considered? C. Propose an intervention that will result in this equilibrium volume.
Explanation / Answer
Equilibrium is attained when demand price= supply price
Here , P= Q/450 Supply function, P=400-Q/50 is the demand function
Equating the two we get,
Q/450 = 400-Q/50
Q/450+Q/50 = 400
10Q/450 =400
Q= 400* 450/10= 18000
Also, P= Q/450 = 18000/450 = 40
Using the new social demand curve,
Q= 20000 - 50P + 250
P= (20000-Q+250)/50
Equating this with supply equation,
Q/450= (20000-Q+250)/50
Q/450+Q/50 = 400+5
10Q/450 = 405
Q= 18225
Now the equilibrium quantity is 18225, P=40.5
Price and quantity both are higher.
c. If the government offers subsidy to the producers, they will increase production or the government can subsidize the consumer they will increase demand for the good
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.