Raise Or Lower Tuition: A Case Study

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Raise or Lower Tuition
Many colleges may decide to raise their tuition in order to increase their revenue and this is justified by stating that they will provide a high quality of teaching, instructors, and facilities. One problem that these institutions may face is that they are continually fighting to increase the number of new students without having to decrease the tuition fees. Nobody State University (NSU) is now facing this dilemma, should the tuition fees be decreased in order to hopefully increase the number of new students or should the tuition be increased in order to increase the revenue with the hopes that new students will continue to apply and attend and those students already attending will not transfer to other universities.
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The university will need to be able to figure out the “coefficient of price elasticity of demand (Ed) The numerical measure of price elasticity of demand, equal to the percent change in quantity demanded of good divided by the percent change in its price” (Amacher & Pate, 2013) and coefficient of price elasticity of supply (Es) The numerical measure of price elasticity of supply equal to the percent change in the quantity supplied of a good divided by the percent change in its price” (Amacher & Pate, 2013). Coefficient of elasticity or COE measures this elasticity of the supply and demand in regards to the price, rather the increase or the decrease. Having a price elasticity of -1.2 tells the university that the demand is at this point inelastic because the elasticity coefficient is less than one. Inelastic demand is the “demand whose percentage change is less than a percentage change in price. For example, if the price of a commodity rises twenty-five percent and demand decreases by only two percent, demand is said to be inelastic” (Dictionary.com, LLC, 2012). If the University is able to increase the tuition and still have a percentage change in new students that is less than the increase they will have a situation where the demand is inelastic. However, there could be any time in this scenario where the percentage change in the other direction which will make the situation elastic demand which means that the demand for a product is sensitive to price changes and the university could lose new students with a tuition

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