Raise or Lower Tuition at Nobody State University
Raise or Lower Tuition at Nobody State University
Student Name
ECO 204: Microeconomics Principles and Policies
Instructor: Name
Date
Raise or Lower Tuition at Nobody State University
Increase in Tuition Fee and Total Revenue In an effort to determine how an increase in the tuition fee of Nobody State University (NSU) will affect the total revenue of NSU we will need to look at the price elasticity of demand to see whether an increase in the tuition fee would cause a total revenue increase or decrease. This is dependent on whether the demand is elasticity demand or inelastic demand. To better understand how this works allow me to explain the term elasticity. According to Amacher & Pate, Microeconomics Principles and Policies, “Elasticity measures the way one variable responds to changes in other variables” (Amacher & Pate, 2013, section 4.2). The formula “Elasticity = Percent change in the dependent variable/Percent change in the independent variable” and it is used to measure elasticity “of how the dependent variable responds to changes in any one of the independent variables” (Amacher & Pate, 2013, section 4.2). So if you have a quantity of goods that you demand (dependent variable) then the independent variables would be; price, income, tastes, and the price of complements and substitutes. Therefore, changes in price that have a small effect on the quantity of goods demanded are considered inelastic and changes in price that have a large effect on the quantity of goods demanded is elastic.
When looking at the price elasticity of demand we are able to determine how increase in tuition fee would affect the total revenue of NSU. An example of whether the increase in tuition fee would cause total revenue to increase, decrease or remain the same depends on the fact whether the demand is elastic, inelastic or unitary.
Price Elasticity and Inelastic Demand Defined
Amacher & Pate, 2013, explain elastic demand as, “When the coefficient
Student Name
ECO 204: Microeconomics Principles and Policies
Instructor: Name
Date
Raise or Lower Tuition at Nobody State University
Increase in Tuition Fee and Total Revenue In an effort to determine how an increase in the tuition fee of Nobody State University (NSU) will affect the total revenue of NSU we will need to look at the price elasticity of demand to see whether an increase in the tuition fee would cause a total revenue increase or decrease. This is dependent on whether the demand is elasticity demand or inelastic demand. To better understand how this works allow me to explain the term elasticity. According to Amacher & Pate, Microeconomics Principles and Policies, “Elasticity measures the way one variable responds to changes in other variables” (Amacher & Pate, 2013, section 4.2). The formula “Elasticity = Percent change in the dependent variable/Percent change in the independent variable” and it is used to measure elasticity “of how the dependent variable responds to changes in any one of the independent variables” (Amacher & Pate, 2013, section 4.2). So if you have a quantity of goods that you demand (dependent variable) then the independent variables would be; price, income, tastes, and the price of complements and substitutes. Therefore, changes in price that have a small effect on the quantity of goods demanded are considered inelastic and changes in price that have a large effect on the quantity of goods demanded is elastic.
When looking at the price elasticity of demand we are able to determine how increase in tuition fee would affect the total revenue of NSU. An example of whether the increase in tuition fee would cause total revenue to increase, decrease or remain the same depends on the fact whether the demand is elastic, inelastic or unitary.
Price Elasticity and Inelastic Demand Defined
Amacher & Pate, 2013, explain elastic demand as, “When the coefficient
References: Amacher, R., Pate, J., (2012). Principles of Macroeconomics. San Diego, California: Bridgepoint Education, Inc Bell, J., & Michelau, D. K. (2001). MAKING COLLEGE AFFORDABLE. State Legislatures, 27(9), 19. MARCUS, J. (2013). Some Colleges Reduce Tuition as Consumers Seek Lower Costs. Community College Week, 26(3), 9.