Answer to Question #215077 in Microeconomics for Zyl

Question

When someone’s kidneys fail, the person needs to have medical treatment with a dialysis machine (unless or until they receive a kidney transplant) or they will die. Sketch a supply and demand diagram, paying attention to the appropriate elasticities, to illustrate that the supply of such dialysis machines will primarily determine the price.

Answer 1

The demand for dialysis machines by the patient is perfectly elastic because it is required for survival. Therefore, the patient will be willing to pay any price for the machine. A vertical line represents the demand, and the supply curve determines the price because the supply curve is the only one that can be shifted upwards or downwards. P is the equilibrium price. Since demand is the inelastic quantity demanded will be fixed at Q.