A few years ago, the State of California increased community college fees from $36 per unit...

A few years ago, the State of California increased community college fees from $36 per unit to $46 per unit. What kind of effect would this have on the demand for education at a community college? What effect will it have on demand for college education in general? Will this impact 4-year colleges and universities? Explain.

Expert Solution

Education is an essential commodity of consumption . Increasing of fees of a community college will impact demand for education adversely . Quantity of education demanded at 46$ will be lesser than at 36$ but not as much as it should be for a normally elastic or unit elastic good . Education is a high inelastic commodity . Even if the fees is increased people would opt for college education , since education paves the way for higher incomes in future . Now if there are other colleges situated near by which have lower fees then people will try to substitute .

College education in general is unlikely to be affected at all . Since education is highly inelastic commodity .People will try to spend less in other commodities to provide for education .

Demand for other colleges and universities is likely to rise because as mentioned earlier , people will try to avail other colleges if communit college fees rise . This is substitution effect .

Rahul Sunny answered 2 years ago

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