Suppose a college has an enrollment of !0,000 students and all the students live in dorms and have a cafeteria plan. Tuition is $20,000 and Room and Board is $10,000 a. Suppose the price elasticity of demand is 2 and the school raises Tuition by 5%. Calculate the effect on Enrollment and b. Calculate the effect on the college’s revenue. Why is the effect on revenue ‘magnified”? c. Where did the college go wrong? What should it do?

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