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Suppose coronavirus vaccines come onto the market. Suppose everyone feels that they have to have these...

Suppose coronavirus vaccines come onto the market. Suppose everyone feels that they have to have these vaccines at any cost (Hint: Law of demand is no longer in effect). Show what happens in this market when a binding price ceiling is placed on these vaccines.

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Answer #1


Ans. As everyone wants to buy the corona vaccine at any cost, so, the demand for the vaccine is perfectly inelastic, thus, the demand curve is vertical. So, a binding price ceiling will lead to a shortage in the market (Qs - Q). This will be an inefficient outcome because all the people valuing the vaccine at atleast its market price won't be able to purachae that medicine creating a deadweight loss in the market (represented by the shaded region in the diagram)

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