Question

Q1. A local paper ran the following headline “University Enrollment Up Despite Economic Hard Times”. Why shouldn’t an economist be surprised at this observation?
Q2. Why are there so few gas stations in the center of large cities? With such heavy traffic one ought to be able to do an excellent business.

Answer 1

Q1) Let me jump straight to the topic.

During recession,economy takes a nose dive. It drags down along with it job market which included getting a job,promotions,incentives etc.

So when recession strikes more people gets unemployed since the job opportunities plummets during recession.Even though placements of colleges decrease during one,no of people enrolling in universities are observed to go up.

Without the job opportunities which were previously available with or without a college degree,people are left with no option but to to join a university.Also people who are already enrolled drop out significantly lower because of a dim job market.

This is the ultimate reason why this contradictory observation is observed.Thus you can say that universities are less affected by recession.

Q2)As a city develops so does the real estate cost of the land city is based on.

So by the city gets developed real estate prices would have already touched sky highs.What we need to understand is fuel business is a sensitive one.So you cant build a gas station without the demand being already in place.But high demands warrant high real estate costs.

Now the second thing we need to look at is how a gas station is built.We can see that it takes up a whole plot of land.You can't just take like a 2nd floor of a building structure.There are many regulations in place regarding this.Therefore buying or leasing that much land is just not a viable business no matter what the demand is.

Third thing we need to look at is supply of fuel to the gas station

This fuel supply gets much tougher when the gas station is placed in the middle of city.Suburbans or outskirts are much easily accessible and cost effective.

Thanks for the question.Keep Chegging.