Economics_Ch06

# Suppose that 30 people want to try out for the

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Unformatted text preview: 05 3:14 PM Page 146 we can say that the quantity supplied of tight end positions is three. Suppose that 30 people want to try out for the position of tight end. The quantity demanded of tight end positions is then 30. Because quantity demanded is greater than quantity supplied, a shortage of tight end positions results. When a shortage of anything occurs in a competitive market, the price of that thing rises. The team’s coach, of course, is not going to accept money from the students who want to try out for the team. What he will do is raise the “price” of being a tight end in a different way. People will have to “pay” to be a tight end with hard work and skill. The players who pay more—demonstrate more skill and work harder—will be the ones to make the team as tight ends. Would these players have to be as good to get on the team if only five people wanted to be a tight end? Not at all. In that case, the shortage of tight end positions would be smaller, and the “price” of being a tight end would not rise as much to bring supply and demand into equilibrium. Supply and Demand on the College Campus As you probably know, you do not need the same grade point average (GPA) or standardized test score (SAT or ACT) to get into all colleges. One college may require a GPA of 3.0 and an SAT score of 1550, while another requires a GPA of 3.8 and an SAT score of 2100.2 Why the difference? Again, the answer is supply and demand. The higher the demand to get into a particular college, the higher its entrance requirements. Take two colleges, college A and college B. Each college will admit 2,000 students to its entering freshman class next year. Each college charges \$5,000 a semester in tuition. The quantity supplied of open spots and the tuition are the same at each college, but suppose the demand to go to college A is three times the demand to go to college B. At college B, 4,000 students apply for 2,000 spots, but 12,000 students apply for 2,000 spots at college A. 2 The new SAT scores used here first went into effect in March of 2005. 146 Chapter 6 Price: Supply and Demand Together The shortage at college A is greater tha...
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## This document was uploaded on 01/16/2014.

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