Organ Donor Question

Q:

I have a question about the part d and about the entire first question in general...What are we to do about price? People don't pay for organs...there aren't different prices - how do we graph demand if there is no price that they pay? For part d specifically, are we assuming price is what the government subsidizes the donor?

A:

I apologize for this question being confusing. You can think about the question as follows: consumers and producers of organs actually behave in accordance with the willingness to pay and willingness to supply as given by the equations. In other words, they would be willing to move to the market equilibrium and pay a positive price if they were left to their own devices. The complication that the article brings up is that basically the government has set a price ceiling (and a price floor) at P=0 by not allowing people to pay to receive organs, since this is considered, well, unfair. But you can see that at P=0 there is a shortage. So you can graph the demand as normal but recognize that the price that the consumer pays has to be zero. Therefore, in order to get supply to meet demand, the government can offer a subsidy, which will shift the supply curve to the right (and effectively give the producer a positive price). If it offers the right subsidy, the new equilibrium will in fact be at P=0 and there will be no shortage or surplus.