Question

Using a series of data collected quarterly (20 years), XYZ University has modelled the demand and supply function of their program offering as below:

Qd = 16,000 - 4000P

Qs = -9,000 + 6000P

Note: P is fees (,000) per subject

b. At the current equilibrium fees, the government believes that poor people deprive of a good education, and hence, enforce that the university should only charge the fees at RM 2,000 per subject.

i. Based on the above scenario, plot the graph to show the new interactions. [5 marks]

ii. How much is the revenue? [5 marks]

iii. Has the revenue increased or dropped after the intervention and by how much? [5 marks]

iv. What will happen to the market efficiency after the intervention (consumer surplus, producer surplus and deadweight loss)? [15 marks]

a. Who loses and who gains? [5 marks]

v. Do you think it is a good for the government to intervene? Provide THREE (3) evidences to support your answer.

I need the answer for b iv & v?

Answer 1

iv) If price is fixed at 2, quantity demanded will be 3,000 units while quantity supplied will be 8,000 units. Consumer surplus will change from area of portion A + B + C to A + B + D

Producer surplus will fall from area of portion D + E + H to H.

Deadweight loss will result in area of portion C + E

v)

• It will benefit students as consumers because of low fee they have to pay.
• It will induce new students to continue education thereby raising literacy rate in long run.
• Government should come up with betterment of society. It will give hope to people that government is doing something for them.