Question #125851
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.
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.
Expert's answer
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.
