Suppose demand for vaccination against whooping cough is Q=200-2p and supply can be represented as p = 22 +Q/4. Suppose the external benefit to society of immunisation is B =Q/4 . The government considers subsidizing individuals to get immunized.
a) What is the social optimum in this market (price, quantity) and the resulting deadweight loss without government intervention?
b) What is the optimal subsidy per vaccination? Explain briefly why?