EconLog Price Theory: The Price of Education

This is the latest in our series of posts in our series on price theory problems with Professor Bryan Cutsinger. You can see all of Cutsinger’s problems and solutions by subscribing to his EconLog RSS feed. Share your proposed solutions in the comments. Professor Cutsinger will be present in the comments for the next couple of weeks, and we’ll post his proposed solution shortly thereafter. May the graphs be ever in your favor, and long live price theory!

Question: Is the following true or false? Explain your reasoning.

If the quantity of higher education services supplied does not rise with the price of those services, i.e., if supply is perfectly inelastic, then subsidizing the demand for higher education services will primarily benefit universities and their employees.