People have to purchase parking permits in order to be able to park, yet there a

Question

People have to purchase parking permits in order to be able to park, yet there are not enough parking spots for everyone. Many times people are forced to use a metered parking lot in order to not be late to class.

1. Identify who would acquire the use of the parking spaces if the allocation were efficent.

 2. Identify the reason for the inefficiency.

3. Provide a market-based solution; the more feasible the better. Market based solutions will necessarily involve voluntary behavior changes. Restricting students and facukty from parking on campus is not voluntary. Assume that adding more parking lots is not a viable short-run solution to the problem.

4. Supply a graph.

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First and foremost, I don't really know what kind of solution to provide since you can't force students or faculty to not park and you can't add lots. What other solutions are there?

Second, for number 1, what is it exactly asking? Is it asking what people would be able to use it once the solution is in place that couldn't use it prior to the solution being in place?

I am guessing the reason fro the inefficiency that demand > supply?

And what kind of graph would make sense here? I don't really see what kind of graph could make sene.

Explanation / Answer

If the allocation was efficient everyone with a parking permit would be able to park at all times and no one without would be able to park. The reason for the inefficiency is that the prices for parking permits are too low and that there are no restrictions as too how many parking permits the university can sell. A market approach to this would be to set a restriction saying that the school can only sell the number of parking permits that are available and then they would be sold through an action so that people bid on each permit. Thereby the university receives the highest possible revenue and everyone with a parking permit is insured to receive a parking spot. In the short run this would be an efficient solution and in the long run more parking spots would be build since the university receives a much higher revenue which will attract competition eventually lowering the prices. A graph that would make sense here could be a regular supply/demand graph since it indicates the efficient price.

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