Question

Suppose that student parking spaces on a college campus are scarce – that there are more demanders than suppliers. The college has to decide how to figure out which students should get the limited spaces. So a committee is formed, and member A suggests that an email should go out to all students letting them know that spaces will be given out on a first come basis starting at 8am Monday. So those who want a space can get there early and get one, and those that arrive too late are left out of the market. Member B proposes that the spaces be distributed by class rank: seniors get first dibs, then juniors, and so on. Member C suggests that spaces be given out based on cumulative GPA – highest gets the first space and so on. Member D suggests an auction, where the highest bidders get the spaces, and that the revenue from the auction be used to maintain the spaces. Which member would you support? Why? Remember, this is an economics class!

Answer 1

I will support student D

The main reason for supporting student D who gave the suggestion that if we keep the auction for spaces and the highest bidder will get space.

Here in this case the demanders are more than suppliers,so if we keep the auction for spaces people have to pay. So people who are willing to bid the highest amount for parking space can only get the space.

When people have to pay money for parking space the demand for that space decrease as people may not be willing to pay the money for parking space or they may not win the auction. So the scarecity for parking space will also come down.

The money that we get from the auction can be used for maintenance of that parking space.