The number of dual-income households in major metropolitan areas is rising rapidly due to shifts in corporate employment policies. In addition, there has been a signficant influx of professional families moving back to metropolitan centers.
Employers have widely recalled staff to city-office hubs, increasing the demand for localized childcare, but the market supply of nursery places is highly inelastic. Providers of childcare services have been constrained by strict statutory staff-to-child ratios, rising commercial rents, and a localized shortage of qualified early-years educators. High regulatory compliance costs and inflation have resulted in very few new nursery openings in busy commercial districts. Shortages have been particularly acute in central business zones, forcing some parents to defer returning to corporate employment.
The escalating cost of monthly nursery fees now consumes more than half of the average median salary in these urban areas. Some middle-income families are finding themselves entirely priced out of local childcare, leading to calls for greater regional government subsidies.
Extract B states that: ‘Employers have widely recalled staff to city-office hubs, increasing the demand for localized childcare, but the market supply of nursery places is highly inelastic.’
With the help of a demand and supply diagram, explain the impact of the increase in the number of working parents seeking urban childcare on the market for nursery places.
256 exam-style questions on AQA A Level Economics 1.3 Price determination in a competitive market, covering 1.3.1 The determinants of the demand for goods and services, 1.3.2 Price, income and cross elasticities of demand, 1.3.3 The determinants of the supply of goods and services, 1.3.4 Price elasticity of supply, 1.3.5 The determination of equilibrium market prices, and 1.3.6 The interrelationship between markets. Each one has a worked solution and a mark scheme showing where the marks go.