Economic Analysis Of Elite Higher Education

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Economic Analysis on Elite Higher Education in California Introduction Higher education is a critical mechanism for individual socioeconomic advancement and an important driver of economic mobility. A well-educated workforce is vital to our nation’s future economic growth. American companies and businesses require a highly skilled workforce to meet the demands of today’s increasingly competitive, global economy. Higher education is provided through a complex public-private market, with many different types of individuals and institutions participating. Federal government has supported higher education by establishing the American Opportunity Tax Credit, expanding income-based repayment for student loans, and freezing the interest…show more content…
It is important to recognize that consumers will buy less of a product as its prices increases. It is also often important to know whether the increase will lead to a large or small reduction in the amount purchased. Economists have designed a tool called the price elasticity of demand to measure the sensitivity of amount purchased in response to a change in price. The equation for the price elasticity of demand is that the percentage of changes in the quantity of a product demanded by the percentage change in the price that caused the changed quantity. The price elasticity of demand indicates how responsive consumers are to a change in a product price (Gwartney). Before we examine some elasticity estimates, we need to consider some aspects of higher education that make it a unique product. First, the process of buying higher education involves multiple steps and decision of both sellers and buyers. Prospective students at selective colleges and universities must apply for admission to their institutions of interest and, depending on their academic credentials, may not be granted the privilege of purchasing the product. Colleges and universities often offer price discounts to a large share of their admitted applicants through financial aid. These discounts can be based on measured ability to repay or on the basis of perceived academic merit. Subside and subsidized loans are offered by federal and state government for purchase of
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