Explain the reason why College A has higher standards for admission than College B.
Explanation of Solution
Figure 1 shows the demand curve for colleges A and B as follows:
In Figure 1, the vertical axis measures tuition and the horizontal axis measures the number of openings. The vertical line is the supply curve of colleges A and B. The downward sloping curve DA is the demand curve of College A, and DB is the demand curve of College B. T1 is the tuition, and it is same for both colleges. Supply or the number of openings at each college is 200. Thus, at Tuition T1, College A has a shortage of 220 openings and College B has a shortage of 90 openings. Therefore, College A has higher standards for admission or number of openings than College B.
Demand curve: The demand curve shows the total value of goods and services that are demanded at a particular price in a given period of time.
Supply curve: The supply curve shows the value of total goods and services that can be purchased at a particular price in a given period of time.
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