Parking Permit Prices Are Too Low*

By Keith Blincoe, Staff Writer

Thunderbird students are up in arms about Arizona State University’s (ASU) new parking permit prices. After October 5, students will need to pay $280 for a year’s worth of parking or $360 if they want to park in the shade. The policy holds across all ASU campuses regardless of parking availability.

Jimmy McMillan understand Thunderbird students' pain.
Jimmy McMillan understands Thunderbird students’ pain.

The students are justifiably upset: A reasonable price would be far higher. “It’s not fair that other ASU students get to pay for parking in order to address serious parking shortages on their campuses, but we can’t, just because there’s no shortage here,” thinks one random MBA student, based on this writer’s interpretation of her facial expression. She continued, “ASU never considers us. What about that handful of us who park on Thunderbird’s vast, empty parking lots? We need to show solidarity with other Sun Devils. Raise the parking permit prices now!”

There are a few dissenting voices. One student, who asked not to be named, cited welfare economics. “Microeconomics teaches that the welfare-maximizing price of something is equal to its marginal cost—any higher and suppliers will produce in excess of demand, and any lower and consumers will demand in excess of supply. The relevance of this? Because parking at Thunderbird is plentiful, the marginal cost is zero—thus the welfare-maximizing price is zero.”

Students and staff wait in this endless line every day to find parking. Photo courtesy of tumbleweedhldgs.com
Students and staff wait in this endless line every day to find parking.
Photo courtesy of tumbleweedhldgs.com

Most students, however, are unfazed by this. A more common outlook takes welfare economics and turns it to ASU’s advantage, as below:

  1. ASU’s objective is to maximize the welfare of ASU (not overall welfare). The old pie metaphor is useful here: ASU wants to maximize the pie it eats, not the size of the whole pie.
  2. A positive parking price will reduce the pie size, but give ASU a bigger slice than it otherwise would have.
  3. ASU students’ objective is identical to that of ASU.
  4. Thunderbird students are ASU students.
  5. Therefore, Thunderbird students want a positive parking price.

This explains why the price should not be zero, but it doesn’t explain why the price should be higher than the announced amount. The reason for that is simple too, and it has to do with price elasticity of demand.

If price elasticity of demand is high, it means a small increase in price will result in a large drop in quantity demanded—because buyers can easily switch to other goods. The classic example is wheat, but any commodity fits the bill. Buyers buy on price, and if a seller raises the price, customers desert her. On the other hand, price elasticity of demand is low, it means customers can’t easily switch away, so a large change in price leads to a comparatively small change in quantity demanded.

Thunderbird students have little choice, so the price elasticity of demand is low. The bottom line? ASU can raise parking prices and expect revenue to rise because students will pay up. “Because it will get more money by raising prices, it should raise prices. It’s really that simple,” say most Thunderbird students.

Thunderbird’s student government, as well as leading staff, are actively working to address the permit problem. Expect updates in the near future.

A satirical view of a student body concern.

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