SAPLINGPLUS ACCESS MICRO 1 TERM
4th Edition
ISBN: 9781319319038
Author: KRUGMAN
Publisher: MAC LTD
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Chapter 2, Problem 8P
To determine
An economist might say that colleges and universities "produce" education, using faculty members and students as inputs. According to this line of reasoning, education is then "consumed" by households. Construct a circular-flow diagram to represent the sector of the economy devoted to the college education. Colleges and universities represent firms, and households both consumer education and provide faculty and students to universities. What are the relevant markets in this diagram? What is being bought and sold in each direction? What would happen in the diagram if the government decided to subsidize 50% of all college students' tuition?
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