Answer to Question #214767 in Finance for judas

Question

The governments of the world are grappling with Covid 19 pandemic, several measures are being implemented, namely, sanitizing, social distancing, hand-washing, working from home or online and various forms of Lockdowns. The hope of all nations is to vaccinate at least 70% of the population to reach head-immunity. This is based on Scientific advice, that once that population percentage is immunized, the whole population would be protected, Economist call this positive externality in consumption. With suitable diagrams, illustrate and discuss the phenomenon highlighted above.

Answer 1

This is a positive externality in consumption because the government will purchase the vaccine while the country's population enjoy the benefit of it's usage as the third party.

Here the marginal benefit in consumption (SMB) is greater than private marginal benefit (PMB). Consumption will be at Q1 because demand equals supply,that is, private benefit=private cost. However social efficiency will occur at Q2 because social cost =social benefit.