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

Yes, the lecturers' decision on whether or not to get vaccinated affect their students, because if the lecturers are not vaccinated than there is a very high chance that they may catch the flu virus and get ill. If they are I'll and come to class than again there is a very high chance that the students may catch the flu virus because they stay very close to the lecturer and sometimes come in contact with them. So because of the lecturers the students may also fall ill.

This situation gives rise to a market failure in the firm of Negative externality. This is because due to the action of the lecturers the students may suffer loss or incurr cost in terms of money spent on treatment and other difficulties experienced. This represents a market failure because here the marginal private cost is lower than the marginal social cost.

The government can address this market failure by making vaccination compulsory for everyone, so that everyone gets vaccinated and no one falls I'll and hence there will be no externality occurring and hence no market failure. Government can do this either by providing the vaccination free of cost or by imposing fines on those who do not get vaccinated.

The potential downsides of the government intervention in this case may be an increase in the overall cost of vaccination. This is because if government makes it compulsory and charges for it everyone have to pay some money and also if government provides it free of cost to everyone than it will incurr cost which they will get from the tax revenue and hence tax rate may increase which will increase the burden of tax on people or may come at the cost of other programmes.