Question

A recent study on enrollment at a liberal arts college concluded that demand elasticity is 0.91. The administration is considering a tuition increase to help balance the budget. The revenue-maximizing decision is to:___.
a. decrease tuition, which should boost enrollment enough to balance the budget.
b. decrease tuition, which would bring in more revenue.
c. leave tuition as is an increase would not help balance the budget.
d. increase tuition, which would generate more revenue.

Answer 1

Based on the fact that the demand elasticity is 0.91, the revenue-maximizing decision would be to d. increase tuition, which would generate more revenue.

Why is this the revenue-maximizing decision?

When the demand elasticity is below 1 as is the case here, it means that demand is inelastic.

When demand is inelastic, an increase in price will lead to a lower decrease in demand. This means that increasing prices for enrollment in this college will bring in revenue because there won't be much change in demand.

In conclusion, option D is correct.

Find out more on demand elasticity at brainly.com/question/6791468.