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?

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?

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter20: Elasticity: Demand And Supply

Section: Chapter Questions

Problem 11E: The price elasticity of the demand for gasoline is -0.02. The price elasticity of demand for...

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