Explain the impact of the increase in the number of students attending university on the market for student accommodation

AQA A-Level Economics Paper 1 June 2024

Extract B (lines 3–4) states that ‘Universities have expanded the number of places on offer to students, but the supply of student accommodation is highly inelastic’.

With the help of a diagram, explain the impact of the increase in the number of students attending university on the market for student accommodation. (June 2024)

1. Firstly, as there are more students attending university, this leads to an increase in the demand for student accommodation.
2. This is shown with a right shift in demand from D1 to D2 in the diagram below.
3. As demand increases, there is an expansion along the supply curve.
4. This means there is an increase in both the equilibrium quantity and the equilibrium price at q2 and p2.
5. The supply of student accommodation is price inelastic.
6. This means that the increase in price leads to a proportionally small increase in the quantity.
7. Providers of student accommodation are unlikely to have spare factors of production such as land, meaning it is difficult to produce more even when the price rises.

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