Question

What would happen if the US government imposed a price floor restriction on college tuition? For example, all students must now pay at least $50,000 per year, no matter what school they attend - what would happen at the schools that are the most and least expensive? What decisions would students make about choosing schools? Similarly, what do you think would happen if there was a price ceiling on tuition? In this case, all students would pay no more than $10,000 per year in tuition. How would this affect students, and the most and least expensive schools? Why might the government consider each of these policy options?

how would an increase in Massachusetts sales tax affect demand for a good with inelastic price demand? Elastic price demand? From the State Government's perspective, increasing taxes could have both positive and negative implications. Please provide one example each for how an increase in sales taxes would benefit the State's finances or economy, and how they could harm them.

Please answer these question more than 450 words, and give reference.

Answer 1

Price floor When a condition is put on students to pay at least $50,000 per year, no matter what school they attend, they will flock to the least expensive colleges so as to minimize the net payment they have to make for college tuition fees. More expensive the college, more net pay they will end up paying Thus, students would choose least expensive colleges. Price ceiling When a ceiling is put on students to pay not more than $50,000 per year, no matter what school they attend, they will flock to the most expensive colleges so as to maximize on their net benefits received from studying. Thus, students would choose most expensive colleges. An increase in sales tax is like an increase in price of the goods. In case of inelastic demand, an increase in sales tax (increase in P) would not reduce demand for the good much and thus tax revenue collected would increase drastically, thereby benefitting the state government In case of elastic demand, an increase in sales tax (increase in P) would reduce demand for the good too much and thus tax revenue collected would not increase drastically, thereby not benefitting the state government.