The picture above is an interesting anecdote suggesting the fundamental prevalence of demand and supply. Our world is energized with constant demand and supplies. Education is no exception. Government demands that children in a specific age group should have school exposure. To this end, the public schools offer subsidies to increase the 'supply' of students (i.e. to attract more students into education). However, the same application of subsidy to private schools does not yield practical intended results as private school education is mostly by choice and does not come under the direct impact of demand and supply, as we will see it. The argument that government should eliminate subsidies to ...view middle of the document...
com). Simply put, "supply" can be defined as the force which helps in determining the market price. Therefore, supply implies the following:
• The quantity of a commodity offered for sales
• The commodity at a particular price
• The commodity during a given period in time
A supply schedule is a table which contains values for the price of a good and the quantity that would be supplied at that price (Investorwords.com). If the data from the supply schedule table is charted, it will demonstrate the supply curve. Below is a hypothetical table showing the amount of stuffed animals supplied at different prices.
Now, the Law of Demand and Supply is contextual in our discussion. The law of demand states that as price decreases, quantity demanded increases. An inverse relationship exists. The law of demand is dependent on ceteris paribus -- all other factors remaining unchanged (Hoffarth, 2007). Thus, when the price of a product or service increases, the demand for the product falls and vice-versa.
The demand curve is a negatively sloped curve.
Clearly, when the price of the commodity increases from price p3 to p2, then its quantity demand comes down from Q3 to Q2 and then to Q3 and so on.
The Law of Supply states that other factors remaining constant, price and quantity supplied of a good are directly related to each other. In other words, when the price paid by buyers for a good rises, then suppliers increase the supply of that good in the market. This means higher the price, higher the quantity supplied. Producers supply more at a higher price because selling a higher quantity at higClearlyher price increases revenue. The supply curve is a positively sloped curve.
A, B and C are points on the supply curve. Each point on the curve reflects a direct correlation between quantity supplied (Q) and price (P). At point B, the quantity supplied will be Q2 and the price will be P2, and so on. Supply and demand curves shift over time as market conditions change. Demands shift with seasons, with changes in prices of related goods, or simply with changing tastes (The Basics of Supply and Demand).
Pertaining to the question, it is important to understand subsidy. A subsidy can be defined as a benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy is usually given to remove some type of burden and is often considered to be in the interest of the public. In this context, subsidy is being levied on the private school fees as an economic assistance provided by government to various institutions so that people reap the maximum benefit out of it and it increases the scope for education. This turns out quite ironical when government decides to subsidize private schools’ fees.
Subsidies might be given to:
• Lower the cost of necessary goods which might affects a major part of population. Example, subsidies given to essential food items and oil (in India).
• Guarantee the supply of merit...