Facing stiff competition, Hendrix College, a small liberal arts ...

[burton19126]

Facing stiff competition, Hendrix College, a small liberal arts institution in Conway, Ark.
 
  , decided two years ago to bolster its academic offerings, promising students at least three hands-on experiences outside the classroom, including research, internships and service projects. Although it raised tuition and fees by 29 percent, enrollment in the freshman class rose by 37 percent.
  Source: Jonathan D. Glater and Alan Finder, In New Twist on Tuition Game, Popularity Rises With the Price, New York Times, December 12, 2006
 
  Based on the information above, the demand for Hendrix College education is
  A) relatively elastic.
  B) unit elastic.
  C) perfectly elastic.
  D) More information is needed to answer the question.

Question 2

How does the imposition of a penalty for selling or possessing an illegal drug influence demand, supply, price, and the quantity of the drug consumed?
 
  What will be an ideal response?

[ynlevi]

Answer to Question 1

A

Answer to Question 2

If buyers and sellers face penalties, both the demand and supply curves shift leftward. If the shift of the supply curve is larger, the equilibrium price rises and quantity decreases; if the shift of the demand curve is larger, the price falls and quantity decreases; if the shifts are the same magnitude, the price is unchanged and the quantity decreases.