Explain how an increase in state subsidies to public college

Question

Use two market diagrams to explain how an increase in state subsidies to public colleges might affect tuition and enrollments in both public and private colleges.

Answer 1

The state subsidies to public colleges shift the supply curve of the public colleges to the right, thus reducing tuition and increasing enrollments in these institutions.  Decreased cost of public college education leads to some substitution away from the private colleges, where the enrollment demand curve shifts to the left.  A lower cost of tuition in both public and private colleges is the final result.