Introduction
What effects do changes in supply and demand have on equilibrium price and quantity? Suppose that the supply of some good (for example, health care) is constant and demand increases. As a result, the new intersection of the supply and demand curves is at higher values on both the price and
the quantity axes. Clearly, an increase in demand raises both equilibrium price and equilibrium quantity. Conversely, a decrease in demand reduces both equilibrium price and equilibrium quantity.
Directions
Real (inflation-adjusted) tuition costs were nearly constant during the 1960s despite a huge increase in the number of college students as the very large Baby Boom generation came of age. What do these constant tuition costs suggest about the supply of higher education during that period? When the much smaller Baby Bust generation followed in the 1970s, real tuition costs fell. What does that fact suggest about demand relative to supply during the 1970s?
