Suppose tuition fees for a university increase from £3,000 to £9,000. After the increase, enrolment drops by 5%. a) Calculate the price elasticity of demand for education at this university. Explain. b) Do tuition revenues at this university increase or decrease following the tuition fee change? How is this related to the price elasticity of demand for education at this university? Explain. c) Focusing on welfare (private and social costs and benefits), give the main economic argument(s) as to whether the government should subsidize higher education or not, and if so by how much. Provide sufficient detail for your argument(s). d) In some countries higher education is provided free of charge to all students. Does this make such higher education a public good? Explain. e) Explain why setting up a cartel and maintaining collusion may be difficult in general. f) Explain how a maximum tuition fee of £9000 imposed by the government may facilitate collusion between universities.

Suppose tuition fees for a university increase from £3,000 to £9,000. After the increase, enrolment drops by 5%. a) Calculate the price elasticity of demand for education at this university. Explain. b) Do tuition revenues at this university increase or decrease following the tuition fee change? How is this related to the price elasticity of demand for education at this university? Explain. c) Focusing on welfare (private and social costs and benefits), give the main economic argument(s) as to whether the government should subsidize higher education or not, and if so by how much. Provide sufficient detail for your argument(s). d) In some countries higher education is provided free of charge to all students. Does this make such higher education a public good? Explain. e) Explain why setting up a cartel and maintaining collusion may be difficult in general. f) Explain how a maximum tuition fee of £9000 imposed by the government may facilitate collusion between universities.

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter6: Consumer Choice And Demand

Section: Chapter Questions

Problem 10QFR

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