Final answer:
The situation described illustrates inelastic demand, where changes in price have a minimal effect on the quantity demanded. Students may be willing to pay higher tuition rates due to the value of a degree and other factors like reputation and career opportunities.
Step-by-step explanation:
The situation described in the question illustrates inelastic demand. Inelastic demand refers to a situation where changes in price have a minimal effect on the quantity demanded. In this case, even though there was a 12-percent hike in tuition, the enrollment rate at the university was only slightly affected.
Inelastic demand can occur when there are no close substitutes for the product or when the product is a necessity. In the context of higher education, students may be willing to pay higher tuition rates because a degree is often seen as a valuable investment in their future.
For example, even with the increase in tuition, students may still value the university's reputation, quality of education, and potential career opportunities, leading to a relatively stable enrollment rate.