Assume Tuition At Private High Schools Is $5000 Per Term

Assume Tuition At Private High Schools Is 5000 Per Term With 100

Assume tuition at private high schools is $5,000 per term with 100,000 students attending in 2012. Draw the initial market for private high school spaces. Suppose the US government decides to eliminate all funding to public schools. What effect would this have in the market for private high school spaces? You must shift either the supply or demand curves (or both) and explain why you shifted the curve(s). Label (with numbers) possible new prices and quantities.

Paper For Above instruction

The market for private high school spaces in 2012 was characterized by a stable equilibrium where the price of tuition was $5,000 per term, and 100,000 students were enrolled. This initial equilibrium resulted from an intersection of the demand and supply curves for private high school education. Demand reflects families' willingness to pay for private education, influenced by perceived quality, income levels, and availability of alternatives. Supply depends on the number of private high schools willing and able to offer spaces at various tuition prices, considering costs and profit incentives.

In the initial scenario, the demand curve is represented as downward-sloping: as tuition decreases, more students are willing to enroll, and vice versa. The supply curve is upward-sloping: as tuition increases, schools are willing to offer more spaces, aligning with increased profitability. Equilibrium occurs at a point where these two curves intersect, at a tuition of $5,000 and an enrollment level of 100,000 students.

Now, considering the government's decision to eliminate all funding to public schools, we analyze its impact on the private school market. Public schools traditionally serve as an alternative to private education; they are often considered a substitute for private schools. When public school funding is cut, the quality and availability of public education are likely to decline. As a result, families who might have preferred or considered public schools as an option now perceive private schools as a necessary substitute for quality education, increasing the demand for private high school spaces.

This scenario results in a rightward shift of the demand curve for private high school spaces. Families' willingness to pay higher tuition increases because their alternative—public schooling—is less attractive or accessible. The shift in demand can be represented as a new demand curve, D2, that is to the right of the original demand curve, D1. The increase in demand causes the equilibrium price and quantity to rise from their original levels. For instance, the new equilibrium might see the tuition increase to $6,000, and the number of students enrolled rising to 120,000, reflecting heightened demand for private education amid deteriorating public options.

Simultaneously, the supply curve might respond differently depending on private high schools' capacity and willingness to expand. If private schools have the capacity and resources to increase their supply of seats, the supply curve shifts rightward, from S1 to S2. This increase in supply helps accommodate the increased demand, but prices still tend to rise because the magnitude of demand increase exceeds supply expansion.

In the combined scenario, the new equilibrium point with demand shift alone results in higher prices and quantities, effectively increasing private school tuition and enrollment levels. Conversely, if private schools are unable to expand rapidly due to capacity constraints, prices could rise significantly, while quantities grow only modestly. The net effect is an increase in tuition from $5,000 to approximately $6,000 and an increase from 100,000 to 120,000 students, reflecting heightened demand and constrained supply.

In conclusion, the elimination of public school funding significantly impacts the private high school market by increasing demand due to families' reduced access to public schools. This shift results in higher tuition prices and greater enrollment in private high schools as they absorb students displaced by the decline in public education quality and funding.

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