1. Consider the human right to food. Let there be a standard supply and demand model where the price of calories per day is measured as an index value from 0-100 with 0 being relatively cheap calories (from a pricing perspective, not quality per se) and 100 being relatively expensive. Let the quantity be measured in calories per day. In other words, as the price index increases, so does the quantity supplied of calories. At the same time, as the price index increases, the quantity demanded falls.
a. Suppose there is a minimum quantity of calories per day that a consumer absolutely needs to survive and live an autonomous life. Suppose further that the current equilibrium in the calories market is such that the quantity is less than this minimum.
i. Draw the supply and demand diagram, being sure to label all applicable information.
ii. Is there a shortage or surplus of calories at the equilibrium index price?
iii. Suppose a policy exists (i.e., a subsidy) that could increase the supply of calories such that the new equilibrium engendered a lower price and corresponded to the minimum quantity of calories.
1. Would there still be people without an ability to fulfill their daily caloric needs through this market? Either way, show your answer in the diagram and explain your answer in words.
2. How are subsidies funded? What effect would this have on consumers?
iv. (New Diagram). Go back to the original scenario in (a.i and a.ii), and consider how your answers would change if there was a sudden increase in the demand for calories such that the new equilibrium price index value was higher and the quantity corresponded to the minimum caloric intake.
1. Would there still be people without an ability to fulfill their daily caloric needs through this market? Either way, show your answer in the diagram and explain your answer in words.
b. (New Diagram). Suppose that the current equilibrium in the calories market is such that the quantity is more than the minimum requirement.
i. Are there still people unable to secure their daily minimum caloric intake?
ii. Would a food redistribution program work? Show and explain your answer.
2. In a similar framework but separate from your answers to question (1) above, consider the human right to health. Let there be a standard supply and demand model where the price of healthcare services per day is measured as an index value from 0-100 (with the same meaning as that of the calorie price index discussed above). Let the quantity be measured in healthcare services provided per day (yes, a very general measure of healthcare services).
a. Suppose the government enforces a price ceiling on healthcare services (yes, assume that it is relatively simple to set a price ceiling in a market like this where the price is an index value).
i. Why would they do this?
ii. Show and describe what happens in the market if the ceiling is set below the current equilibrium price.
iii. (New Diagram). Show and describe what happens in the market if the ceiling is set above the current equilibrium price.
iv. How do your answers to (ii) and (iii) change if demand becomes relatively more inelastic?
b. Is such a price control a good or a bad policy choice? Explain your answer. If you agree, explain why. If you disagree, explain why and offer a different policy tool and explain why it might be a better choice.