Question

Suppose that, in an attempt to raise more revenue, Anywhere State University increases its tuition. Will this necessarily result in more revenue? Under what conditions will revenue (a) rise, (b) fall, or (c) remain the same? Explain this process, focusing on the relationship between the increased revenue from students enrolling at ASU despite the higher tuition and the lost revenue from possible lower enrollment. If the true price elasticity were -1.1, what would you suggest the university do to expand revenue? If you were the president of ASU, how would you tackle this problem based on what you have learned in this course?

Answer 1

Answer:

1. That will not necessarily result in more revenue because it depends on the price elasticity of demand for the schools tuition fees

Explanation:

Suppose that, in an attempt to raise more revenue, Anywhere State University increases its tuition.

1. That will not necessarily result in more revenue because it depends on the price elasticity of demand for the schools tuition fees

2. Under the conditions that price is in-elastic, revenue will rise,

Under the conditions that price is elastic, revenue will fall,

Depending on the mix of reaction, if there is a 50% elasticity and 50% in-elasticity, revenue may remain the same.

3. Explain this process, focusing on the relationship between the increased revenue from students enrolling at ASU despite the higher tuition

This would mean that schooling at ASU has an inelastic demand as earlier stated.

4. Explain the process of  lost revenue from possible lower enrollment.

This would mean that schooling at ASU has an elastic demand as earlier stated.

5. If the true price elasticity were -1.1, what would you suggest the university do to expand revenue?

Above unitary elasticity implies that the demand for the school is very elastic i.e. revenue will fall with increase in tuition fees

6. If I were the president of ASU, I would tackle this problem based on what I have learned about price elasticity by reducing tuition fees a little to increase revenue much more since the price elasticity is above 1.