Economics of Social Issues - Assignment Example

Question The market for health care without Medicaid is represented by the supply and demand curve shown in the diagram. Themarket is at equilibrium with price P* and quantity Q*. The market for health care relate to the market for goods and services (Brux 197). Moreover, the effects that result to change in the price of health care result to the movement along the demand curve (Brux 196). Therefore, because Medicaid reduces the price of health care among the poor, there is a movement along demand curve from the equilibrium point Q*, P* to Q1, P1 as shown in the diagram.

The poor have access to health care at a cheaper price of P1, which the non poor buy health care at market equilibrium at price Q*. Question 2a) Kidney marketThe demand exceeds the supply in the market for kidney due to law prohibiting the sale and distribution of kidney. The laws affect the supply side of kidney market making it hard to sell their kidney for fear of prosecution. Due to the prohibition the supply curve is inelastic. The shortage of kidney is given by q’ minus q*.The market for kidney can be corrected by allowing for the sale and distribution of kidney in a free market.

This would address the shortage of kidney and enable people with enough income to buy though at a higher price. The market equilibrium would be at price P* and at quantity Q* as shown in the diagram.b)The market for kidney is prone to negative externalities. The poor people are subject to exploitation from the rich by selling their organs in exchange for money. Moreover, people with debt may be pressured in selling their body organ to repay their debtor.The negative externality will result to increased sale of the kidney reducing the price of kidney to (p’) at quantity q’.

Negative externality increases the production of services above the optimal level and thus the poor become vulnerable at the long run. ReferenceBrux, Jacqueline. Economics Issues and Policy. 2013. London. Cengage Learning. Print.