Question

Sahar is a lecturer of a large class of economics students. Sahar can’t stand being ill and so decides to get a flu vaccination. On the other hand, some of Sahar’s colleagues decide to skip their vaccinations because they are too busy. Do the lecturers’ decisions on whether or not to get vaccinated affect their students and if so how? Describe any market failures that arise from this situation. Describe how the government can address any of these market failures. What are some of the potential downsides to government intervention in this case?

Answer 1

The lecturers' decision on whether to get vaccinated or not will affect the their students.

This is because vaccines have a positive externality associated with them. If people are vaccinated, they carry lesser risk of carrying that disease and thus spreading it to others.

In case of a positive externality, the marginal social benefit from a particular activity is not realised and the optimum private equilibrium quantity is less than the social optimum equilibrium quantity.

Now, the positive externality can be solved or the output can be increased to social optimum level through the government intervention. One way to solve this is through giving subsidies or free vaccines to lecturers. This step is expected to increase the number of lecturers going for vaccines.

As mentioned in the question, some lecturers are too busy to go for it. Thus, inefficiency and the cost to the govenrment are potential downsides to this step.

Another step is to reward in cash and kind to those who will get themselves vaccinated. This step can encourage more people to get vaccinate.

Again, the potential downside of this step is the cost to the government which will furthur be met through taxation which is not a good incentive for people in the economy.