The October 10, 2013 issue of the Wall Street Journal contained an article entitled, , by Melissa Corn. The article asserts that: A dozen or so colleges actually are cutting their tuition in order to stimulate enrollment. At the same time, the same institutions are diminishing their tuition “discounting”---the practice of giving back to selected students generous hunks of their tuition in the form of financial aid. When colleges do discount their tuition prices, the actual, effective tuition price that many students pay is less than the “sticker” tuition price that the colleges publish. Knowing these facts, please answer the following questions: What must be true about the price elasticity of demand of students for college attendance in order for (a) not only to increase enrollment, but also increase tuition revenue? Explain why What if lots of other colleges join the parade and do the same thing? Provide a written and graphic analysis. What are these colleges assuming about the sensitivity of students and their families to “sticker” tuition prices versus their sensitive to actual, effective tuition prices (after financial aid)? Explain why
The October 10, 2013 issue of the Wall Street Journal contained an article entitled, , by Melissa Corn. The article asserts that: A dozen or so colleges actually are cutting their tuition in order to stimulate enrollment. At the same time, the same institutions are diminishing their tuition “discounting”---the practice of giving back to selected students generous hunks of their tuition in the form of financial aid. When colleges do discount their tuition prices, the actual, effective tuition price that many students pay is less than the “sticker” tuition price that the colleges publish. Knowing these facts, please answer the following questions: What must be true about the price elasticity of demand of students for college attendance in order for (a) not only to increase enrollment, but also increase tuition revenue? Explain why What if lots of other colleges join the parade and do the same thing? Provide a written and graphic analysis. What are these colleges assuming about the sensitivity of students and their families to “sticker” tuition prices versus their sensitive to actual, effective tuition prices (after financial aid)? Explain why
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
The October 10, 2013 issue of the Wall Street Journal contained an article entitled, , by Melissa Corn. The article asserts that:
A dozen or so colleges actually are cutting their tuition in order to stimulate enrollment.
At the same time, the same institutions are diminishing their tuition “discounting”---the practice of giving back to selected students generous hunks of their tuition in the form of financial aid. When colleges do discount their tuition prices, the actual, effective tuition price that many students pay is less than the “sticker” tuition price that the colleges publish.
Knowing these facts, please answer the following questions:
What must be true about the price elasticity of demand of students for college attendance in order for (a) not only to increase enrollment, but also increase tuition revenue? Explain why
What if lots of other colleges join the parade and do the same thing? Provide a written and graphic analysis.
What are these colleges assuming about the sensitivity of students and their families to “sticker” tuition prices versus their sensitive to actual, effective tuition prices (after financial aid)? Explain why.
Expert Solution
Step 1
Price elasticity of demand:
The quantity demanded is subject to change with respect to changes in the commodity price. The net change un demand subject to a unitary price change is known as the price elasticity of demand.
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