ECO 204 PRINCIPLES OF MICROECONOMICS ASHFORD. 2 ASSIGNMENTS
Raise or Lower Tuition?
Russell O. Cross
ECO 204 Principles of Microeconomics
Instructor Shane Thompson
January 5, 2015
ECO 204 PRINCIPLES OF MICROECONOMICS ASHFORD. 2 ASSIGNMENTS
Raise or Lower Tuition
Raise or Lower Tuition?
Nobody State University (NSU) needs to raise revenue in order to survive. Their dilemma is whether to raise or lower tuition. They prefer to do this by raising tuition. The only way to determine which path to take is to observe the relationship between the rate of enrollment and the amount of tuition charged. We do this by studying and making analysis from the past records.
Conditions under which revenue will rise
We need to determine which type of demand the relationship between tuition and enrollment is. This will allow us to see under which conditions that revenue will rise. If the relationship is that of perfectly inelastic demand, there is no response of quantity demanded to changes in price. (Amacher & Pate, 2013) This means that if NSU increases tuition, and there wasn’t a drop in enrollment, revenue would increase.
If the relationship is one of an Inelastic demand, it means that changes in price bring about changes in quantity demanded in less proportion so that elasticity is less than one. NSU could increase tuition, which will increase revenue, even if enrollment decreases because it will do so in a less proportionate rate compared to the increase in price.
Conditions under which revenue will fall
If Elastic demand is the relationship between tuition and enrollment, and if changes in price bring about changes in quantity demanded in greater proportion, then elasticity is greater than one. The increase in tuition will result in an automatic decrease in revenue. If the relationship
ECO 204 PRINCIPLES OF MICROECONOMICS ASHFORD. 2 ASSIGNMENTS
between tuition and enrollment is that of Perfectly Elastic demand,...