Imagine the government introduces a new subsidy for measles vaccinations. The government will pay consumers of the vaccination 50% of the vaccination price. Which effect is most likely in the market for vaccinations?

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BlackTom AI · Accepted Answer

The question describes a government subsidy that covers 50% of the vaccination price for consumers. This effectively lowers the out-of-pocket price that consumers face, which typically increases the quantity demanded. 
Option a: 'An increase in supply leading to a lower price and larger quantity of vaccinations consumed' is focusing on supply behavior. A subsidy to buyers generally shifts the demand curve, not the supply curve, so this option misattributes the effect to supply. 
Option b: 'A decrease in demand leading to a lower price and smaller quantity of vaccinations consumed' runs counter to the subsidy effect. Since the price paid by consumers falls, demand should not decrease; in fact, it should rise, all else equal. 
Option c: 'An expansion in demand leading to a larger quantity of vaccinations consumed' correctly captures the typical outcome: lower effective price increases quantity demanded, shifting the demand curve to the right and resulting in more vaccinations consumed. 
Option d: 'An increase in demand leading to a higher price and larger quantity of vaccinations consumed' incorrectly suggests that the price rises when a subsidy lowers consumer price. Subsidies to buyers reduce the effective price, not raise it, so this option contradicts the economic mechanism at work. 
In summary, the subsidy reduces the price faced by consumers, boosts demand, and leads to a higher quantity demanded, while misrepresenting the effects in the other options.

Imagine the government introduces a new subsidy for measles vaccinations. The government will pay consumers of the vaccination 50% of the vaccination price. Which effect is most likely in the market for vaccinations?

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Imagine the government introduces a new subsidy for measles vaccinations. The government will pay consumers of the vaccination 50% of the vaccination price. Which effect is most likely in the market for vaccinations?

From the list below, the best definition of the word 'subsidy' is

From the list below, the best definition of the word 'subsidy' is

A(n) to producers is a payment from the government that decreases producers' cost and encourages them to produce more output.

Which of the following are the effects of a subsidy to producers? More than one answer may be correct.

Government could correct the overallocation of resources by subsidizing consumers of the product.

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