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 subsidy to consumers effectively lowers the out-of-pocket price they face, which shifts the demand curve outward (an expansion in demand).

1. Relevant concepts
- Subsidy to buyers: a per-unit payment that reduces the effective price consumers pay, increasing willingness to buy at each seller price.  
- Demand shift vs movement along demand: a change in the price consumers face (net of subsidy) causes a shift (expansion) in demand rather than a supply change.  
- Equilibrium adjustment: when demand shifts right, equilibrium quantity rises; the effect on prices received by sellers vs paid by buyers depends on incidence, but quantity unambiguously increases.

2. Step-by-step reasoning
- Government pays consumers 50% of the vaccination price. If the sticker price is P, the consumer’s out-of-pocket cost is P/2.  
- At every possible seller price, consumers now face a lower effective price, so more people are willing to get vaccinated. This is a rightward shift (expansion) of the demand curve.  
- With the demand curve shifted right and supply unchanged, the market moves to a new equilibrium with a higher quantity of vaccinations consumed. The consumer’s net price falls (or is lower than before) while the price received by suppliers may adjust depending on market elasticity and subsidy incidence.

3. Calculations / intermediates
- Example: original price P = $20 → consumer pays $20. With 50% subsidy, consumer pays $10 (out-of-pocket). At $10 effective price, quantity demanded increases relative to original demand at $20.

4. Why the correct answer is correct
- The subsidy targets consumers, so it increases demand (expansion), and the most direct, assured consequence is a larger quantity consumed.

5. Why other options are incorrect
- (a) Increase in supply: incorrect because the subsidy is to consumers, not producers, so supply does not shift.  
- (b) Increase in demand with higher price: demand does increase and quantity rises, but the statement that price rises is misleading because consumers face a lower out-of-pocket price; option (d) is the clearer correct description.  
- (c) Decrease in demand: wrong direction.

Conclusion: The correct outcome is an expansion in demand leading to a larger quantity of vaccinations consumed, matching answer d.

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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