Question

A pandemic influenza (akin to the severe 1918 flu epidemic) that kills 2 million or more people could also cause annual income loss of 4% to 5% of global national income (see Fan et al., 2016). Using the concepts in this chapter (such as externalities, free riding, and public goods), explain what a pandemic is. Is government intervention necessary to help prevent pandemics, or can society rely solely on markets? (Hint: See the Application “Free Rid- ing on Measles Vaccinations.”)

Answer 1

Pandemic is epidemic disease which spread through infection and if not cured, it may lead to devastating consequences. It should be nip in bud to do away with negative externalities. People would have little incentives to take precautionary steps to immune potential impacts of Pandemic.

People also do not reveal their true demand for curing such pandemic. Hence, they are not ready to pay for vaccinations. Private cost of such disease is much lesser than the social cost.

Hence, here government has to intervene to provide such vaccinations free of cost or at nominal rate. Hence, cure for such disease is public good. Its benefits are widespread across the regions and countries.