DPrivate is what Big Drug is willing to borrow for research and development at each interest rate, judged by the profits it expects to keep. Studies find the original inventor captures only a third to a half of the economic value an innovation creates: the rest goes to other firms that build on the idea and to the people who use the products. Adding those spillovers gives DSocial, which lies above the private curve at every rate.
At the going rate of 8 percent the firm borrows $30 million. Counting the spillovers, $52 million of that research would be worth doing. The gap is the underinvestment that positive externalities produce, and it is the reason governments subsidize research rather than leaving it to firms. The slider changes the cost of borrowing and both quantities move along their curves.