Question

The following Supply and Demand equations describe the market for Bachelors Degrees in the US in 2018-19 school year. All numbers are in 1,000s. The price represents 4 years of tuition, and the quantity represents the number of graduates with bachelors degrees in a single year.

Qd = 5700 − 38 Pd

Qs = 12.667 Ps + 380

Government subsidies in the form of guaranteed loans and grants are valued at $5,000 per year per student, or $20,000 over four years.

2. Find the subsidized equilibrium outcome for the 2018-19 school year.

a) What is the quantity of bachelor’s degrees awarded at the end of the 2018-19 school year?

b) What is the price paid by consumers (students)?

c) What is the price received by producers (universities)?

Answer 1