Question

A certain university issues parking permits to allow students to park on campus. The price of the permit is set by college administrators at any price they choose; they do not consider market conditions. At the current price, some students complain that there aren’t enough spaces for them to park.
1. Describe this situation in economic terms and describe what this implies about market equilibrium and the price of a parking permit.

2. Should the price of a permit be raised or lowered to fix this situation?

3. Use the supply and demand model to describe how a graph of the market for parking permits would be affected by a change in price. Do not submit a graph as part of your response, however.

Answer 1

The situation in economic terms is that there is a shortage of parking space.

How to illustrate the information?

1. From the information, it was stated that certain university issues parking permits to allow students to park on campus and the price of the permit is set by college administrators at any price they choose.

Therefore, the situation in economic terms is that there is a shortage of parking space.

2. The price of a permit be raised to fix this situation. This will make more space available.

3. The graph of the market for parking permits would be affected by a change in price as it will help to bring about an increase in supply when the permit is increased.

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