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Economics of Higher Education

   

Added on  2020-03-23

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PriceSQuantityDP*Q*Economics Introduction1NameProfessorInstitutionCourseDateNAME:ID NO:Tutor’s name:(1)[4 marks]
Economics of Higher Education_1

PriceSQuantityDP*Q*Economics Introduction2The price of a degree is going up when the subsidies from the government goes down.This is because the production of graduates will be costly hence those who are graduatingfrom the colleges will tend to have high demand because they are few. When the governmentsubsidies goes down, the cost of production of graduation will go up and hence the value ofthe graduates will also go up.The marginal cost for any quantity that is produced and is relative to the item goes down inline with the subsidies that are made by the government. The subsidies made are responsiblefor the shift of the supply curve to the right and leads to the decrease in the price of thosepeople who are graduating from the universities Acemoglu (2014).(2). [4 marks]
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Economics Introduction3The equilibrium in the market occurs where the quantity supplied is equal toquantity demanded. This occurs at point where quantity supplied is Q* and price isP*.When the firms are in dire need for the skilled workers, then the demand for theuniversity graduates goes up which would be denoted by the movement of thedemand curve to the right (towards letter D).the movement will then be followed byan increase in supply of the university students. When the supply of the skilledworkers increases, their prices starts to fall (Berman, Bound and Griliches, 2012p.78).As suggested by the article, when the firms are in shortage of the skilled workers, thegraduates will then have a high demand in the market and hence they can easily hiketheir prices( wages and salaries).Due to high wages, the graduates will flow in themarket and by large numbers hence causing excessive supply in the job market. Giventhat the graduates are left alone to determine the prices, they will hike it so that theirconsumers are unable to acquire them. The government then comes in to control theprices. (3)[4 marks]A college wage premium is the wage gap that exists between the college graduatesand that of high school graduates. The value of education is determined by other decisionswhich also have a greater effect on our future earnings.one can opt to invest in other fields ifhe or she finds out that the value of investing in education is riskier than that of investing inthat other field. The relatively flat college wage was caused by more graduates entering thelabour market so that the market became saturated with the skilled labour Johnson (2013).(4) {3 marks}
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