Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 21: Problem 12

College tuition has risen significantly in the last few decades. From the \(1981-1982\) academic year to the 2011-2012 academic year, total tuition, room, and board paid by full-time undergraduate students went from \(\$ 2,871\) to $\$ 16,789\( at public institutions and from \)\$ 6,330\( to \)\$ 33,716$ at private institutions. This is an average annual tuition increase of \(6.1 \%\) at public institutions and \(5.7 \%\) at private institutions. Over the same time, average personal income after taxes rose from \(\$ 9,785\) to \(\$ 39,409\) per year, which is an average annual rate of growth of personal income of \(4.8 \%\). Have these tuition increases made it more difficult for the average student to afford college tuition?

Short Answer

Expert verified
Answer: Yes, college tuition increases have made it more difficult for the average student to afford college tuition, as the growth rates of tuition fees at both public and private institutions are greater than the growth rate of personal income.

Step by step solution

01

Find the difference in growth rate for tuition fees and personal income at public institutions

First, we need to compute the difference in growth rate between tuition fees and personal income at public institutions. To do that, we just need to subtract the growth rate of personal income from the growth rate of tuition fees: At public institutions: Difference in growth rate = Growth rate of tuition fees at public institutions - Growth rate of personal income Difference in growth rate = \(6.1\% - 4.8\%\) Difference in growth rate = \(1.3\%\)
02

Find the difference in growth rate for tuition fees and personal income at private institutions

Now, let's do the same calculation for private institutions: At private institutions: Difference in growth rate = Growth rate of tuition fees at private institutions - Growth rate of personal income Difference in growth rate = \(5.7\% - 4.8\%\) Difference in growth rate = \(0.9\%\)
03

Analyze the results

Now we have the differences in growth rate for both public and private institutions: - At public institutions: \(1.3\%\) - At private institutions: \(0.9\%\) Since both differences are positive, this means that the growth rates of tuition fees at public and private institutions are greater than the growth rate of personal income. Therefore, we can conclude that college tuition increases have indeed made it more difficult for the average student to afford college tuition.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

When one person saves more, that person's wealth is increased, meaning that he or she can consume more in the future. But when everyone saves more, everyone's income falls, meaning that everyone must consume less today. Explain this seeming contradiction.

How do economists in the United States determine when a recession begins and when it ends? How do other countries determine whether or not a recession is occurring?

Before the Great Depression, the conventional wisdom among economists and policy makers was that the economy is largely self-regulating. a. Is this view consistent or inconsistent with Keynesian economics? Explain. b. What effect did the Great Depression have on conventional wisdom? c. Contrast the response of policy makers during the \(2007-2009\) recession to the actions of policy makers during the Great Depression. What would have been the likely outcome of the \(2007-2009\) recession if policy makers had responded in the same fashion as policy makers during the Great Depression?

a. What three measures of the economy tend to move together during the business cycle? Which way do they move during an upturn? During a downturn? b. Who in the economy is hurt during a recession? How? c. How did Milton Friedman alter the consensus that had developed in the aftermath of the Great Depression on how the economy should be managed? What is the current goal of policy makers in managing the economy?

Why do we consider a business-cycle expansion different from long-run economic growth? Why do we care about the size of the long-run growth rate of real GDP relative to the size of the growth rate of the population?
See all solutions

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free