Imagine the government introduces a new subsidy for measles vaccinations. The government will pay consumers of the vaccination 50% of the vaccination price. Which effect is most likely in the market for vaccinations?

Question

BlackTom AI · Accepted Answer

A consumer subsidy lowers the buyer’s out-of-pocket price, which increases willingness-to-pay and therefore expands demand.

1) Relevant concepts
- A subsidy paid to consumers effectively reduces the price they pay, raising quantity demanded at each possible market price (a rightward shift or “expansion” of demand).
- Supply is unchanged by a consumer subsidy (unless suppliers receive the subsidy directly).
- Equilibrium adjusts: quantity rises; the price received by sellers and the price paid by buyers (net of subsidy) can move in different directions.

2) Step-by-step reasoning
- Before the subsidy, market equilibrium is where supply = demand.
- The government pays consumers 50% of the vaccination price, so consumers face a lower effective price. At every posted market price, more consumers find vaccination affordable → demand increases (demand curve shifts right).
- With supply unchanged and demand higher, the new equilibrium has a larger quantity of vaccinations consumed.

3) Numerical illustration (intermediate steps)
- Suppose initial demand: P = 10 − Q and supply: P = 2 + Q.
- Initial equilibrium: 10 − Q = 2 + Q → 8 = 2Q → Q = 4, P = 6.
- With a 50% consumer subsidy that makes consumer pay Pc = P/2, consumers’ willingness to pay condition becomes P/2 = 10 − Q → P = 20 − 2Q (demand effectively shifts/right).
- New equilibrium with supply: 20 − 2Q = 2 + Q → 18 = 3Q → Q = 6, P = 8. Quantity rises from 4 to 6. Consumers’ out-of-pocket Pc = P/2 = 4 (lower than before).

4) Why the correct answer is correct
- The subsidy increases consumers’ effective purchasing power and so expands demand, which increases the quantity of vaccinations consumed. That is exactly what option d states.

5) Why other options are incorrect
- (a) Focuses on a higher price paid by buyers; in a consumer subsidy buyers pay less out-of-pocket even if sellers receive a higher posted price. So (a) is misleading.
- (b) A subsidy would not decrease demand.
- (c) A consumer subsidy does not shift supply; it affects demand.

Conclusion: The correct effect is an expansion in demand leading to a larger quantity of vaccinations consumed (option d), which matches the provided answer.

Imagine the government introduces a new subsidy for measles vaccinations. The government will pay consumers of the vaccination 50% of the vaccination price. Which effect is most likely in the market for vaccinations?单项选择题

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