Economics of Social Issues Assignment Example | Topics and Well Written Essays - 250 words

Economics of Social Issues - Assignment Example 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. 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