Q.39 When someone鈥檚 kidneys fail, t... [FREE SOLUTION]

Chapter 5: Q.39 (page 131)

When someone鈥檚 kidneys fail, the person needs to have medical treatment with a dialysis machine (unless or until they receive a kidney transplant) or they will die. Sketch a supply and demand diagram, paying attention to the appropriate elasticities, to illustrate that the supply of such dialysis machines will primarily determine the price.

Short Answer

Expert verified

The price is determined only by the position of the supply curve. As a result, the intersection of the supply and demand curves determines the equilibrium price P.

Step by step solution

Step 1:Definition

Elasticity :

Elasticity is defined as the measure of changes in the supply and demand of goods and services as a result of price changes. It demonstrates how pricing influences enterprises' and consumers' choices of goods and services.

Explanation

According to the information provided in the question, if a patient dies without the usage of a dialysis machine, demand for the equipment will be completely inelastic because the machine is required for the patient's survival until a kidney transplant is obtained. As a result, the patient will be willing to spend whatever amount is necessary to obtain the equipment.

Because only the supply curve may be modified upward or lower, the vertical line depicts the shape of a perfectly inelastic demand curve, and the price is controlled by the supply curve.

The supply curve is represented by Supply, with the horizontal axis representing quantity and the vertical axis representing price, as well as the inelastic demand curve, which is represented by the vertical demand curve in the diagram above.

Step 3:Conclusion

Therefore, the equilibrium price P is determined by the intersection of the demand and supply curves. The quantity demanded remains constant at Q because demand is inelastic.