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Many State Governments Support Higher Education Through Subsidies

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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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U.S. States

U.S. States are the fifty administrative divisions of the United States, each with its own government and jurisdiction under the federal system.

Infant Mortality Rate

The rate at which babies under one year old die, often calculated per 1,000 live births.

United States

A country in North America consisting of 50 states and a federal district, known for its large economy and diverse population.

Fairly High

A relative measure indicating a level or amount that is somewhat above average or normal.

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