Question

Economics: Supply and Demand

USF issues parking permits to allow students to park on campus. The price of the permit is set by college administrators at their discretion, they do not consider market conditions. At the current price, some students complain that there aren’t enough spaces for them to park.

A) Describe this situation in economic terms and describe what this implies about the market equilibrium and the price of a parking permit.

B) Should the price of a parking permit be raised or lowered to fix this problem? Why? Explain.

C) Use the supply and demand model to describe how a graph of the market for parking permits would be affected by a change in price. You must include a graph and describe the graph.

PLEASE HELP !

Answer 1

A) In this case Supply is less than the demand as there is not enough space that can be provided by the USF and demand is huge. Market is in inequilibrium stage because Demand is greater than supply and price set by college administrators is less than what it should be.

(B) The price of the parking permit should be increased to achieve market equilibrium. So that Demand = Supply.Whne price will increase demand will decrease to the supply level and hence equilibrium will be achieved (Law of demand)

(C) For please refer graph