Question

The market for college education is perfectly competitive. Over the recent years, costs of equipping and maintaining modern classrooms, laboratories, and libraries increased. Also, a growing number of high school graduates desired college education. How did these changes affect the equilibrium price and quantity of college education in this market

Answer 1

Equilibrium price increases while the effect on equilibrium quantity is indeterminate.

Step-by-step explanation:

Due to the higher cost of equipping and maintaining schools, the supply of schools would fall. This would increase the price of schools and the supply would fall.

Increased desire for college education would increase the demand for schools and the price of schools.

Taking the effect of demand and supply together, the equilibrium price would rise and there would be indeterminate effect on quantity

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