College Education and The Economy - Essay Example

College Education and the Economy College Education and the Economy The simultaneous increase in college admissions and the average tuition fee contradicts the law of downward-sloping demand. The demand of a good or service in a market characterizes the amount that consumers are ready and able to buy (Samuelson & Marks, 2012). Furthermore, the free market economy forces determine the demand. The downward-sloping demand indicates the amount of product demanded and its respective current price in the market.

The conventional law of demand states that ceteris peribus, an increase in price leads to a decrease in the amount demanded (Samuelson & Marks, 2012). However, this case shows a situation where the demand of college education does not decrease despite the drastic increase in the tuition fees.As mentioned, the increase in tuition fee is expected to discourage the demand for college education for most people in the economy. This would portray a free market economy where prices determine the demand.

However, the students in need of education have various expectations about their future economic status and career prospects. Consequently, the students observe their education based on prospective future gain in labor and wages. This is considered as the future economic rewards to education (Samuelson & Marks, 2012). Therefore, its demand increases influencing the enrollment in various colleges across the country. As a result, the increase in the price of college education over the last 30 years in the U.

S has not affected the demand for the education from the high school graduates and nationwide college enrollments.B. The U.S government does not support its citizen’s education directly. Instead, it provides its support through the provision of loans and grants to the students over the period of four years for a standard degree course. After the completion of the college education, the former students are required to repay the loans extended to them at a given subsidized interest rate. As a result, the U.

S government does not have control over the patters of change in the college tuition fee.The first graph shows the price of college education against the quantity provided, Q1. The supply of education has remained constant with minimal improvements in the existing educational institutions. Therefore, the supply curve is represented by S. the demand curve, D1 shows the present demand for college education. The need for education from the numerous high school graduates has increased its demand. This is indicated by a shift of the demand curve to the right from D1 to D2.

Since the supply of the commodity is constant, the price increases from P1 to P2. This explains the dramatic increase in price of college education amid the drastic increase in demand.Fig. 1 The graph of price against quantity of college educationP SP2 D2P1 D1 Q1 QuantityIn figure 2, S1 represents the initial supply of government’s grants and loans to colleges while D1 represents the initial demand for education from these institutions. The government reduced the supply of the grants and loans leading to a shift of the supply curve to the left from S1 to S2.

At the same time, the demand for college education increase from D1 to D2. Therefore, the prices of college tuition increased from P1 to P2 in order to adjust for the decrease in the supply of government’s grants and the increase in demand for the commodity.Fig. 2 The graph of price of education against the quantity of government grants and loans P S2 S1 P2 P1 D2 D1 Q1 QuantityReferenceSamuelson, W.F., & Marks, S.G. (2012). Managerial Economics. (7th ed.). Hoboken, N.J.:Wiley.