Answer to Question #127486 in Microeconomics for Enoch

Question

Assume a certain area of UENR Campus has been specifically designed to provide hostel accommodation facilities for students from low-income homes. The students who stay in the area tend to stay there because they cannot afford to live in other hostel facilities on Campus, they prefer to live with students they pursue the same programme with, or there is discrimination against them in other hostel facilities on Campus. Rents paid are a very high percentage of the students’ income.
iv. Now assume the University creates a rent subsidy programme where a student is required to pay 30% of income in a hostel accommodation. Any additional rent is paid by the University – up to a limit. For example, a student with an income of GH¢1000 a month would be required to pay GH¢300 in rent (30%). If the rent is GH¢500, the other GH¢200 would be paid by the University. Analyse the effect of this programme. Who gains and who loses from this programme.

Answer 1

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