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Many State Governments Support Higher Education Through Subsidies

Question 43

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Many state governments support higher education through subsidies.(A subsidy is like a negative excise tax).Consider the following supply and demand for college education at State U,which shows the equilibrium that would prevail without subsidies: annual tuition is $20,000 with Q0 enrolled students.Suppose the state provides a $10,000 per year subsidy paid to State U for each student enrolled.What impact will this subsidy have on the equilibrium tuition level and number of enrolled students? Explain. Many state governments support higher education through subsidies.(A subsidy is like a negative excise tax).Consider the following supply and demand for college education at State U,which shows the equilibrium that would prevail without subsidies: annual tuition is $20,000 with Q<sub>0</sub> enrolled students.Suppose the state provides a $10,000 per year subsidy paid to State U for each student enrolled.What impact will this subsidy have on the equilibrium tuition level and number of enrolled students? Explain.

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