Economics 15th Edition by James Gwartney,Richard Stroup,Russell Sobel,David Macpherson

Exercise 4

Suppose that, in an attempt to raise more revenue, Nowhere State University (NSU) increases its tuition. Will this necessarily result in more revenue? Under what conditions will revenue (a) rise, (b) fall, or (c) remain the same? Explain this, focusing on the relationship between the increased revenue from students who enroll at NSU despite the higher tuition and the lost revenue from lower enrollment. If the true price elasticity were -1.2, what would you suggest the university do to expand revenue?