Over the last 30 years in the United States, the realprice

of a college education (i.e., after adjusting for inflation) has increased by almost
70 percent. Over the same period, an increasing number of high school grad-
uates have sought a college education. (Nationwide college enrollments almost
doubled over this period.) While faculty salaries have barely kept pace with
inflation, administrative staffing (and expenditures) and capital costs have
increased significantly. In addition, government support to universities (partic-
ularly research funding) has been cut.
a. College enrollments increased at the same time that average tuition rose
dramatically. Does this contradict the law of downward-sloping demand?
Explain briefly.
b. Use supply and demand curves (or shifts therein) to explain the dramatic
rise in the price of a college education.

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a. The law of downward-sloping demand states that as the price of a good or service increases, the quantity demanded of that good or service decreases, all other factors remaining constant. In the case of college education, however, the increase in college enrollments alongside the rising tuition costs appears to contradict this law.

There are a few reasons why this may be the case. First, a college education is often seen as a prerequisite for better job opportunities and higher earning potential. As the job market becomes more competitive and the demand for skilled workers increases, more high school graduates may perceive a college education as a necessity rather than a choice. This increased perceived value of a college degree could lead to a higher demand for college education even when prices are rising.

Secondly, there may be other factors at play that are counteracting the law of downward-sloping demand. For example, the availability of student loans and financial aid programs can make college education more affordable, even with increasing tuition costs. As a result, students may still enroll in college despite the higher prices because they believe they will be able to finance their education through these programs.

b. To explain the dramatic rise in the price of a college education using supply and demand curves, we need to consider the factors that have influenced both supply and demand.

On the demand side, as mentioned earlier, an increasing number of high school graduates have sought a college education. This increased demand puts upward pressure on prices. Additionally, the perceived value of a college degree has also increased due to factors such as rising competition in the job market and societal expectations for higher education. These factors shift the demand curve to the right, resulting in higher equilibrium prices.

On the supply side, factors such as the rising costs of administrative staffing, capital investments, and reduced government support have influenced the supply of college education. The increase in administrative staffing and expenditures, as well as capital costs, can be attributed to a variety of reasons such as increased regulation, technological advancements, and infrastructure development. These cost increases shift the supply curve to the left, reducing the quantity of college education supplied at any given price.

Overall, the combination of increased demand and reduced supply has led to the dramatic rise in the price of a college education. It is important to note that these explanations are simplified and the actual dynamics of the college education market are complex, involving various economic, social, and government factors.