Question

help short essay assignment

for non resident students it cost 183 annual

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. Address the following three points in a short essay: • Describe this situation in economic terms and describe what this implies about the market equilibrium and the price of a parking permit • Should the price of a parking permit be raised or lowered to fix this problem? Why? Explain. • 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 reference/describe the graph in your essay,

Answer 1

• In the problem there arises a situation where there exist some demand for parking place for students, and price is determined by the administrator irrespective of market condition. That means the administrator holds monopoly power in fixing the price of parking and students have no other option of going to any other parking place. Thus equilibrium in such a market exist where marginal revenue is equal to marginal cost. That means cost of providing extra parking place should be equal to the revenue earned from that extra parking place. In that case this kind of a market will be in equilibrium and every student will have a parking place and will be saisfied by the determined price. Thus price will be matched by demand.
• In the problem the issue that arises is that, some students are not getting place to park. This is the case of excess demand. In order to match the market demand, administrator may increase the price level and so that some of the consumer may go without it and problem of excess demand may be resolved.
• The above iscussed scenario is depicted as follows:
  
  P.AR,MRMC. 3 Fri como Xol MC (Supply Po ) ca E a AT AR (demand Qo Q MR 1) mo
  
  Here equilibrium exist at E corresponding to which equilibrium quantity Q₀ and equilibrium price is P₀.At this price quantity combination entire demand is satisfied. Now suppose price is at P₁ corresponding which demand is P₁a and supply is P₁​​​​​​​E. Thus economy faces excess demand of Ea or Q₀Q₁. Thus if price is raised to P₀, there will be no excess demand. In context of this problem P₁ is the initial price charged by administrator for parking for which there exist Q₀Q₁ amount of excess demand. If prices are raised to P₀​​​​​​​ there will be no excess demand. The problem will be resolved.