The figure to the right shows the market for measles vaccina

The figure to the right shows the market for measles vaccinations, a product whose use generates positive externalities. What is the market equilibrium output level? Q_2-Q_1 Q_1 Q_1+Q_2 Q_2

Solution

Positive externalities lead market to produce smaller quantity than socially desirable.The social value of good is more than private value.The intersection of supply curve and social value curve finds optimal output level.The intersection of supply and private value curve finds market equilibrium.

Equilibrium quantity is Q1 at the intersection of S1(private cost)and D1(private value).So Q1 is market equilibrium quantity.