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3. Positive Analysis and Supply-and-Demand Graph

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3. [Positive analysis] As we all know, at present it is illegal for parents who want to adopt a child to pay the birth mother for, or to offer to pay for, the babies they adopt. (Adoption agencies do charge for their services, of course.) Use economic theory to analyze the (potential) market for adoptive babies and answer this: what would happen if such payments were allowed? (Draw yourself a supply-and-demand graph to help you think about this question.)

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This solution discusses the effect of opening up a baby market in 138 words.

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Given the law, price for having a baby for adoption is 0, at that point, there are few altruistics potential mothers and so the supply of these services is qs0. Because the price is so ...

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