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4 pages/β‰ˆ1100 words
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APA
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Mathematics & Economics
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English (U.S.)
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Topic:

Raise or Lower Tuition? Assess a Raise in Tuition and if it will Necessarily Result in More Revenue

Essay Instructions:

You have been hired by Nobody State University (NSU) as a consultant to help the university with how to increase their total revenue. The university has been struggling in recent years, so they have hired you to help them in their last attempt to find an appropriate solution so that the university can survive. 
Raise or Lower Tuition? Suppose that, in an attempt to raise more revenue, Nobody State University increases its tuition. 
• Assess a raise in tuition and if it will necessarily result in more revenue.
• Describe the conditions under which revenue will (a) rise, (b) fall, or (c) remain the same.
• Explain the process of revenue at NSU, focusing on the relationship between the increased revenue from students enrolling at NSU despite the higher tuition and the lost revenue from possible lower enrollment.
• If the true price elasticity were (-1.2), discuss what you would suggest the university do to expand revenue.
• Using what you have learned in this course, explain how you would resolve this problem if you were the President of NSU.
In a three- to five-page paper (not including title and reference pages), provide subheadings or separate paragraphs for each of the questions listed to help focus your paper for the executives that have requested it. One of the references to use is Amacher, R., & Pate, J. (2013). Microeconomics principles and policies. San Diego, CA: Bridgepoint Education, Inc.
Please follow the directions presicely.
Just adding to the request to clarify.
Your answer should focus on price elasticity of demand. First define elastic and inelastic demand. Then, discuss how an increase in price (tuition) affects total revenues when demand is elastic and when demand is inelastic. Interpret the type of price elasticity indicated by a price elasticity of -1.2 and what this type of elasticity indicates about what the president of the college should do to tuition (increase or decrease) to increase revenues from tuition. The discussion on these topics can be found in the textbook in sections 4.4 and 4.5.
The information from the textbook that you will need to complete this assignment is found in Chapter 4, Elasticity: The Measure of Responsiveness. The concept of price Elasticity of Demand is found in section 4.2: price Elasticity of Demand. The different types of elasticity are covered in section 4.3: price Elasticity of Demand. The way the price elasticity of demand coefficient is interpreted is found in section 4.3 in the chart labeled: Check Point: Guide to Elasticity Coefficient. 
Once the type of elasticity has been identified, using the -1.2 price elasticity of demand coefficient provided in the question, refer to section entitled: price Elasticity and Total Revenue in section 4.5 to determine whether a tuition increase or decrease will increase total revenues.
Thank you!

Essay Sample Content Preview:

Raise or lower tuition?
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Assess a raise in tuition and if it will necessarily result in more revenue
The tuition costs represent the price and the numbers of students is like the quantity function of the demand curve. In analyzing the effect of raising the tuition fees, the cost implication is considered and how this affects the revenue. Raising the tuition is associated with a reduction in number of students enrolled at Nobody State University. The concept of price elasticity affects student enrollment, and since tuition is the main source of revenue for the universities. Hence, when deciding on tuition fees, there is a need to consider price elasticity.
In an era where rising student debts are overburdening students, raising tuition might not necessarily work, where the students stay away to avoid the mounting debt burden. Universities also need to balance between charging tuition cost and providing quality education services that students would be willing to pay. The administrators then need to understand how students react to changes in tuition cost, which affect the revenue stream of the institutions. At other times, students judge the quality of education services and competition depending on expenditures that signal prestige. The revenue at NSU may rise, fall or remain unchanged when the university increases tuition, deepening on tuition elasticity.
Describe the conditions under which revenue will (a) rise, (b) fall, or (c) remain the same
The elasticity of demand measures the responsiveness of quantity demanded to changes in prices, and is calculated as the percentage change in quantity demanded to the percentage change in price. Since elasticity measures how one dependent variable responds because of other independent variable, the method helps to determine the relationship between the variables (Amacher & Pate, 2013). The demand for a good is inelastic when price changes result in smaller changes in the quantity of demanded goods. Conversely, elastic demand is associated with larger percentage change in quantity of goods demanded when the price changes (Amacher & Pate, 2013). This concept is applicable to tuition costs, as changes in the costs affect the demand for education services, represented by the number of student enrolling. The revenue is the product of tuition costs charged to students and the number of students paying.
When the demand inelastic (<1), a rise in the tuition costs results in higher revenue increases. This is associated with a fall in demand by a smaller percentage when price increases. Similarly, when the elasticity is elastic (>1), lowering the tuition costs will also result in total tuition revenue increase, the price fall increases the demand by a higher percentage resulting in increased revenue (Gwartney, Stroup, Sobel, & Macpherson, 2014). On the other hand, decreasing the tuition costs when the tuition is price inelastic reduces the revenue stream, since the price falls and the demand increases by a smaller percentage. Increasing the price when tuition in price elastic also results in a fall in the revenue since the demand falls by a higher percentage compared to price percentage change. When the demand for tuition i...
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