Question

You recently came across two headlines regarding university tuition costs. What does each statement say about the elasticity of demand for university tuition?a. "Private schools cut tuition and fail to reach enrollment goals"Implied elasticity of demand: _____________________b. "University of California raises tuition on out-of-state students, still at capacity"Implied elasticity of demand: _______________________

Answer 1

The implied elasticity of demand for university tuition is inelastic in both cases. Private schools with lower tuition failing to reach enrollment goals and the University of California raising tuition but maintaining full capacity suggest that demand for these institutions is not highly sensitive to price changes.

Step-by-step explanation:

The demand elasticity for university tuition can be inferred from the way the market responds to price changes. When private schools cut tuition and do not achieve their enrollment goals, it implies an inelastic demand. This suggests that the number of students applying did not significantly increase in response to lower tuition prices, indicating that changes in price have little effect on the quantity demanded of education at these institutions.

On the other hand, the University of California raises tuition for out-of-state students and still operates at full capacity, implying an inelastic demand for their education as well. This shows that demand is insensitive to price changes, and despite higher costs, students are still enrolling in large numbers, possibly due to the perceived value or scarcity of available spots.