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Unformatted text preview: a small increase in equilibrium price. d. In both markets, total consumer spending rises, because both equilibrium price and equilibrium quantity rise. 5. a. See S1. b. The new equilibrium price is P1 and quantity is Q1. The equilibrium tuition decreases and quantity of enrolled students increases. c. A is the proportion of the subsidy which increases the university income and B is the proportion of the subsidy which lows the student tuition. d. When demand is more elastic, the proportion of the subsidy which increases the university income increases (A&gt;A) and the proportion of the subsidy which lower the students tuition decreases (B&lt;B). Annual Tuition Quantity of enrolled students 20,000 S0 S1 D1 Q1 Pstudent A B 10,000 Pschool Q0 Annual Tuition Quantity of enrolled students 20,000 S0 S1 D0 Q1 Pstudent A B 10,000 Pschool Q0...
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This note was uploaded on 11/04/2009 for the course ECON 201 taught by Professor Williams during the Fall '08 term at UVA.
- Fall '08