The article by Norton A. (2016) provides an

overview of higher education policy and trends including enrolment numbers,

courses chosen by local and international students as well as enrolment trends

and employment outcomes in science, IT and engineering. This paper, firstly, throws lights on market

analysis as well as demand and supply analysis. Secondly, it explains the

concept of price elasticity of demand and its types. Lastly, it provides a deep

analysis of positive and negative externalities and it also explains whether

education providers are positive or negative externalities and why.

·

Market & Demand and Supply analysis:

Perfect

Competition: In the given

scenario, there is perfection competition in the market as it satisfies the

definition of Perfect Completion Market system because there are many sellers,

(40 full universities and around 130 other higher education providers) and

buyers (nearly 350,000 international and one million domestic students) in the

market. Mankiw & Taylor (2011) stated that with so many market players, it

is impossible for any one participant to alter the prevailing price in the

market.

Demand and

Supply analysis:

Norton A. (2016)

stated that in engineering, Australia’s higher education system is

performing very well as demand and supply of engineering places respond to

labour market conditions, although the time taken to complete degrees

inevitably means periodic under- or over-supply of graduates. In spite of

fluctuation in demand for engineers, engineering graduates find high-skill jobs

more easily as compared to STEM graduates. So, it can be said that there is

enough market supply to meet market demand (Mankiw & Taylor 2011). So, in this case, equilibrium is the point where the quantity demanded equals the quantity

supplied. This means that there’s no surplus of professionals

and no shortage of jobs.

The given diagram clearly illustrate the relationship

between demand and supply for engineers.

In the case of IT

Profession, universities are not supplying the graduates to meet the demand of fast-moving industry. It means demand is

higher than supply. So, the new equilibrium

point will be above than the old point, as shown in the following diagram and there

is negative relationship between demand and supply (Mankiw & Taylor 2011).

In science, the labour market is over-supplied with

coursework graduates. The number of science graduates is higher than for

engineering or IT, but the number of jobs are lower. In other words, supply is

higher than demand. So, Mankiw & Taylor

(2011) stated that there is

negative relationship between Demand and Supply and the new equilibrium point is lower than the old point, as shown in the following diagram and

there in unemployment in this sector.

·

Price Elasticity of Demand

Gaetan & Bruno (2012)

stated that Price elasticity of demand occurs when the

variation in demand leads to a variation in price. It can also be defined as

the ratio of the percentage change in demand to the percentage change in price

of particular commodity.

The

formula for the coefficient of price elasticity of demand is given below:

Types of Price Elasticity of

Demand:

Ø Perfectly Elastic Demand:

Robert

(2008) agued that when a small change in price of a product causes a major

change in its demand, it is said to be perfectly elastic demand. In perfectly

elastic demand, a small rise in price can lead to fall in demand to zero, while

a small fall in price causes increase in demand to infinity.

Ø Perfectly Inelastic Demand:

Gaetan & Bruno (2012) stated that a perfectly inelastic demand occurs when there is no

change produced in the demand of a product with change in its price. The

numerical value for perfectly inelastic demand is zero (ep=0).

Ø Relatively Elastic Demand:

Relatively elastic demand means the demand when the

proportionate change produced in demand is greater than the proportionate

change in price of a product. The value of relatively elastic demand ranges

between one to infinity (Robert 2008).

Ø Relatively Inelastic Demand:

Gaetan

& Bruno (2012) stated that relatively inelastic demand refers to demand when the

percentage change produced in demand is less than the percentage change in the

price of a product. The numerical value of relatively inelastic demand ranges between zero to one (ep