There is a large university that is located in a very remote area. Students find it inconveniently difficult to leave the university campus to buy food. Fortunately, the campus is very large and well built, and there are 25 cafes, restaurants, fast food shops, and other eateries, where students can buy food. The university has no problems finding people who want to open eateries; in fact, a university official recently revealed that this year there were more than twice as many applications to open eating places as there were spaces available. The number of eateries is limited, since the university has allocated only 25 places on the university campus for the various eateries.  

Students have complained that food on campus is expensive. The university would like to do something in order to lower the cost of food for the students. Two different schemes have been suggested:
Scheme A is to provide a rental subsidy for the eateries. Rent is a fixed cost for the eateries, and the subsidy will lower the rental of the eateries by 60%.

Scheme B is to provide a 20% food subsidy to the students. Students will get an electronic discount card. When they buy food at an eatery with the card, they only pay 80% of the price, and the university will pay the other 20% of the price.  

It has been estimated that both subsidies will cost the university the same amount of money per year. (60% reduction of rent under Scheme A will be approximately equal to 20% of food spending by students under Scheme B.)

Write an essay discussing the advantages (if any) and disadvantages (if any) of Scheme A and Scheme B. Keeping in mind that the goal is to lower the cost of food for the students, discuss whether it is better to implement Scheme A or Scheme B. Try to address the following issues in your essay (however, do not organize your essay in a question and answer format):

• What is the economic impact of Scheme A versus Scheme B, on the restaurants' costs, profits, and prices?
• What about the impact of Scheme A versus Scheme B on student demand and the amount that students will spend on food?
• Which scheme will the cafes, restaurants, and other eateries favor more?
• Which scheme will benefit the students more?
• Is there another (perhaps better) scheme that can reduce the cost of food for the students?
  

As far as possible, use economic reasons and economic arguments to justify your position. Use charts or diagrams as appropriate to justify your position.