Economics of Health Externalities.

Donald Trump announced that the Covid-19 vaccine will be distributed in a massive scale sometime in October 2020(Naylor and Wise, 2020). The majority of US citizens are skeptical about the safety of the vaccine at this stage of development (Hamel et al., 2020). A few days later he updated his estimate for April 2021 (Wise, 2020) which is more in line with the Center of Disease and Control (CDC) assessment about the safe distribution of the vaccine. The citizen trust the CDC.

1. Draw the private and social demand curves when the vaccine is distributed in (i) late October 2020 and (ii) April 2021. Explain your reasoning.

2. How does the optimal rate of vaccination change, if at all, and why?

3. Assume that according to recent estimates, the vaccine is as safe in October 2020 as in April 2021. However, the public perception does not change, even though it is now wrong. How does this change the (i) private demand curve, (ii) the social demand curve and (iii) the optimal number of vaccines?