Question

Attempts: Average: S 5. College admissions Suppose the following graph shows the supply of and demand for admission to Louisiana State University, where supply represents the number of student openings and demand represents the number of students who want to attend LSU (i.e., the number of student applications) at any given level of tuition. Use the graph to help you answer the questions that follow Tool tip: Click and drag one or both of the curves. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just try again and drag it a little farther Admission to Leuisiana State LUniversity NUMBER OF STUDENTS (Thousads) The equilibrium level of tuition at LSU is $42,000 per academic year. If LSU sets its tuition at this price, the number of openings available will be less tharr the number of student applications. Now suppose that the tuition for LSU is set at $28,000 by Louisiana's state assembly. At this level of tuition, the number of openings available will be greater tathe number of student applications. Suppose that in its latest issue, a popular magazine publishes information about colleges in the United States. The magazine declares LSU to be America's best college. Adjust the previous graph to show the effect this will have on the market for admission to LSU The new equilibrium level of tuition at LSU is $70,000 per academic year If the magazine declares LSU to be America's best college and the tuition for LSU is set at $28,000 by Louisiana's assembly, LSU will receive 6,000 more applications for admission than there are openings. Grade It Now Continue without saving

Answer 1

The equilibrium level of tuition at LSU is $42,000 per academic year because at this point, demand is equal to supply If LSU sets its tuition at this price, the number of openings available will be equal to the number of student applications. Suppose that tuition for LSU is $28000. At this, supply is less than demand that is at this fee, the number of openings available will be less than the number of student applications. Suppose the market is in equilibrium and a magazine declares the university as the best university in US. This will increase the demand for taking admissions in the university. As there is no change in the tuition fee, the demand curve shifts rightwards at each tuition fee. The following figure is showing this effect. Tuition Fee Supply $56,000 --- $42,000 ------ New Demand Initial Demand Number of students (In thousands) The new equilibrium is given by the intersection of new demand and the supply (original) curve. At this point, the equilibrium tuition fee is now $56,000 per academic year and the number of students' applicants is still the same as before (at 9,000).

Thus, new equilibrium level of tuition is $56000 per academic year. If the tuition fee is $28,000, the shortage is more than before. The following figure is showing the effect. Tuition Fee Supply New Demand Initial Demand $56,000 -- $42,000 ----- Final Shortage $28,000 ---- 912 Number of students (In thousands) Initial Shortage if the magazine declares LSU to be America's best college and the tuition for LSU is set at $28,000 by Louisiana's assembly, LSU will receive 6,000 more applications for admission than there are openings.