Answer to Question #305761 in Microeconomics for wdwddwdwd

Question

Beginning with the Fall 2018 semester, three North Carolina universities (UNC Pembroke, Western Carolina University, and Elizabeth City State University) reduced their tuition. After the Fall semester had begun, each of these universities announced that they had experienced a large increase in enrollment.

a. Explain what these facts tell us about the price elasticity of demand for education at these universities.

b. Use your answer to part a. of this question to explain whether reducing tuition would lead to an increase, a decrease, or no change in the amount of revenue received by the universities.

Answer 1

a. Price elasticity of demand being a measurement of change in consumption in relation to change in its price, this applies to the case of these universities in that, reduction of tuition imply a reduce in price thus an increase in demand and in this case an increase in enrolment.

b. Reduction of tuition by these universities led to increase in enrolment and thus an increase in the amount of revenue due to more number of students.