Answer to Question #126316 in Microeconomics for Katlego

Question

You have been appointed as an economic advisor to the principle of bright sparks college,a firm operating in the market for tertiary education.over past 18 months the following simultaneous changes have been noticed in the market for tertiary education:
- A decrease in consumer income
- An increase in the cost of providing tertiary education services.
Explain,with the aid of a graph, the impact of the above changes on the equilibrium price and equilibrium quantity in the tertiary education
( Seven marks for a graph and 8 for the explanation)

Answer 1

i)

The decrease in consumer income leads to a decrease in demand for higher education services, which leads to a decrease in the equilibrium price and the equilibrium amount of the services provided.

ii)

The increase in prices for higher education services leads to a shift in the supply line to the left, which is accompanied by a decrease in the equilibrium amount.