Question 1

(a) Consider the market for online education. Due to the improvement in education technology, it is easier and more cost-effective for education institutions to offer courses online with interactive features and communication platforms. At the same time, due to COVID-19 which results in movement restrictions and safety concerns, people have a greater
preference to pursue education online. Explain the effects on the price and quantity of online equation when these two incidents occur concurrently. Support your answers with the help of market diagrams for online education.

(b) The government wishes to encourage more people in the country to pursue education and is considering implementing a price ceiling or providing a subsidy to the consumers. Compare and contrast the price of education, the quantity of education traded and the welfare effects of these two policies. An economist claimed that providing a subsidy to the consumers is more efficient than imposing a price ceiling. Appraise the validity of this claim and support your answers with suitable diagrams for the education market.

(c) Consider the university education market in Singapore. Based on the determinants of the price elasticity of demand, comment on the price elasticity of demand for the university education in Singapore and explain whether the demand for the university education in Singapore is likely to be elastic or inelastic. Justify your answers.