Answer to Question #214716 in Microeconomics for Khakhi

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

Positive externality in consumption arises when vaccinating a single person benefits other groups of people as there are lower chances of that single person contracting the virus and then spreading it on to anyone else because s/he is vaccinated.

Thus a single person taking the vaccine benefits a third party leading to positive externality.

Earlier Marginal private benefit at quantity Q was lower than marginal social benefit because only a few number of people were vaccinated.

When the government provides a subsidy and tries to vaccinate more number of people, the welfare loss reduces and eradicates as Marginal social benefit is equal to Marginal social cost leading to positive externality as there is an increase in quantity which reaches the optimal level leading to increase in marginal social benefit.

And thus there is efficiency attained as more number of people being vaccinated increases the immunity of almost the entire population leading to it providing immunization to other groups of people.