Answer to Question #125851 in Microeconomics for Faith

Question

You have been appointed as an economic advisor to the principle of Bright Sparks College, a firm
operating in the market for tertiary education. Over the past 18 months the following
simultaneous changes have been noticed in the market for tertiary education:
 A decrease in consumer income;
 An increase in the cost of providing tertiary education services.

Explain, with the aid of a graph, the impact of the above changes on the equilibrium price and
equilibrium quantity in the tertiary education market.

Answer 1

A decrease in consumer income will cause a decrease in demand for tertiary education.

An increase in the cost of providing tertiary education services will cause a decrease in supply of tertiary education.

As a result the equilibrium quantity will decrease, but the change in equilibrium price can't be determined without additional information.