Answer to Question #127807 in Microeconomics for Kgaogelo

Question

Explain with the aid of a graph,the impact of a decrease in consumer income and an increase in the cost of providing tertiary education services,changes the the equilibrium price and equilibrium quantity in the tertiary education market?

Answer 1

There will be an alteration of two aspects in the market. A decline in the consumer income will appear to shift the demand curve towards the origin, and a rise in the education cost tends to change the supply curve left. Depending on the scope of the change, there might be the following three cases represented by the the three figures below.

1. A shift in demand exceeds the shift in supply. as illustrated by figure 1 below. In this scenario, the equilibrium price and equilibrium quantity both will fall.

2.A shift in demand below the shift in supply. as illustrated by figure 2 below. In this scenario, the equilibrium price will rise, but the equilibrium quantity will fall.

3.The shift in supply equal to the shift in demand as illustrated by figure 3 below. In this scenario, the equilibrium price will be the same, while the equilibrium quantity will fall.