18.13 Policy Application: Kidney Markets: A large number of patients who suffer from degenerative kidney disease ultimately require a new kidney in order to survive. Healthy individuals have two kidneys but usually can live a normal life with just a single kidney. Thus, kidneys lend themselves to “live donations”;

that is, unlike an organ like the heart, the donor can donate the organ while alive (and live a healthy life with a high degree of likelihood). It is generally not permitted for healthy individuals to sell a kidney;

kidneys can only be donated for free (with only the medical cost of the kidney transplant covered by the recipient or his insurance). In effect, this amounts to a price ceiling of zero for kidneys in the market for kidneys.

A. Consider, then, the supply and demand for kidneys.

a. Illustrate the demand and supply curves in a graph with kidneys on the horizontal axis and the price of kidneys on the vertical. Given that there are some that in fact donate a kidney for free, make sure your graph reflects this.

b. Illustrate how the prohibition of kidney sales results in a “shortage” of kidneys.

c. In what sense would permitting the sale of kidneys eliminate this shortage? Does this imply that no one would die from degenerative kidney disease?