Nov 29 2011

“I am the condom friend ever useful to you”

Published by at 2:08 pm under Externalities,Market failure

Market failures exist all around us. Until you have studied the concept, however, you would probably never know it! Not all market failures are in the form of pollution, however, and in fact many of the goods that are beneficial to society can be pointed to as examples of market failure.

If a good creates external benefits for society beyond those enjoyed by the consumer of the good itself, it is said to create positive externalities of consumption. Condoms are an example of such a good; when an individual uses a condom when having sex, he enjoys several private benefits, such as reducing the chance of becoming infected with a sexually transmitted disease and reducing the likelihood of an unwanted pregnancy. However, the benefits for society of condom use are much greater, and include lower HIV and other STD infection rates, thus a healthier, more productive population, lower birth rates thus less pressure on resources from excessive population growth. These are external benefits of condom use, which means they will not be considered when an individual decides whether or not he will use a condom when engaging in sex.

Using the terminology of market failure, the marginal social benefits of condom use exceed the marginal private benefits. Thus, when left to the free market, the quantity of condoms consumed will be less than the socially optimal quantity. Not enough people will use protection when having sex: birth rates will be higher than desired, HIV infection rates will be higher and society as a whole will bear the costs of unsafe sexual activity.

In India, a developing country where the average woman still has nearly three children in her life, population growth threatens to put increasing pressure on the nation’s resources. Therefore, the country could benefit greatly from increased use of condoms.  The video below demonstrates an attempt by non-governmental organizations to increase awareness among Indian males about the purpose and appropriate use of condoms.

Watch the video and respond to the questions that follow:

Discussion Questions:

  1. What approach does the video take to correcting the market failure in the use of condoms?
  2. Why is condom use lower than what is socially optimal in India?
  3. Is this video an example of a commercial, or is it a public service announcement? What’s the difference?
  4. Do you think it will work? How would we know if the video succeeded or failed?

About the author:  Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course. Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this author

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