Certain diseases, such as chicken pox, are highly contagious.

When a person is affected by chicken pox, their family members, colleagues, and people whom they regularly interact with stand a high risk of catching the disease.

The disease can be prevented by taking an injection of vaccine in local hospitals. The decision to take the vaccine is purely voluntary and some people choose not to go ahead with it due to the high cost involved.

a. What type of externality occurs for vaccines against contagious diseases?

b. Use a suitable diagram to show the market equilibrium quantity of the vaccine. Is the quantity also socially efficient?

c. Suggest one method to achieve a socially efficient outcome.