Tuition and fees for four year colleges in the United States have risen over five percent per year recently. One cause for the increase in price has been an increase in demand for college education. In the standard model, what could be a possible explanation for the increase in the demand for college education?
A. More colleges have been established
B. The cost of two-year colleges has declined over the same period
C. Income in the United States has risen
D. The price of all other goods in the economy has risen 3 percent over the same period
Answer:C
Tuition and fees for four year colleges in the United States have risen over five percent per year recently. One cause for the increase in price has been an increase in demand for college education. In the standard model, what could be a possible explanation for the increase in the demand for college education?
A. More colleges have been established B. The cost of two-year colleges has declined over the same period C. Income in the United States has risen D. The price of all other goods in the economy has risen 3 percent over the same period
Explanation: An increase in income shifts the demand curve to the right. More colleges shift the supply curve. A decrease in the price of substitutes would have the opposite effect as the one described. The fact that all other goods has risen by less than the rise in college tuition means that the price of college tuition has still increased relative to most other goods.