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Nobody State University (NSU)
Raise or Lower Tuition

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Increase in Tuition Fee and Total revenue
It is the price elasticity of demand that would determine how increase in Tuition fee
would affect the total revenue of Nobody State University (NSU) i.e. whether the increase in
Tuition Fee would cause total revenue to increase, decrease or remain same depends on the fact
that whether the demand is inelastic, elastic or unitary. Price elasticity of demand measures the
degree of responsiveness in quantity demanded of a good due to change in its price. It is cal
If demand is elastic (or if absolute value of elasticity is less than one), then proportionate
decline in quantity demanded of a good (as a result of increase in price) will be larger than
proportionate increase in its price and therefore in this case, increase in price would cause total
revenue to fall.
If demand is inelastic (or if absolute value of elasticity is less than one), then
proportionate decline in quantity demanded of a good (as a result of increase in price) will be
less than proportionate increase in its price and therefore in this case, increase in price would
cause total revenue to increase.
If demand is unitary (or if absolute value of elasticity is equal to one), then proportionate
decline in quantity demanded of a good (as a result of increase in price) will be equal to
proportionate increase in its price and therefore in this case, increase in price would cause no
change in the total revenue.
Conditions under which revenue will (a) rise, (b) fall, or (c) remain the same
As explained above, if demand is elastic, increase in the tuition fee would cause total
revenue to fall; if demand is inelastic, increase in the tuition fee would cause total revenue to

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increase; or if demand is unitary, increase in the tuition fee would cause no change in the total
revenue of Nobody State University (NSU).
We can prove the same mathematically as well.
We know total revenue is obtained by multiplying price with quantity sold i.e.
TR = P*Q
Differentiating this with respect to price, we get
TR
P
as
TR
P
= Q + P*
Q
P
= Q + P*
Q
P
×
Q
Q
Putting e =(-)
Q
P
×
P
Q
, where ‘e’ denote absolute value of price elasticity
implifying, we get
TR
P
as
TR
P
= Q(1-e)
This shows that if the absolute value of price elasticity is greater than one (i.e. if demand
is elastic), then increase in price (or tuition fee) would lead to fall in total revenue; or if absolute
value of price elasticity is less than one (i.e. if demand is inelastic), then increase in price (or
tuition fee) would lead to increase in total revenue, however, if price elasticity of demand is one,
then increase in price (or tuition fee) would cause no change in the total revenue.
Process of revenue at NSU (Nobody State University)
Total revenue is defined as the product of price and quantity demanded. In this case, it is
the product of tuition fee and total enrolment of student at NSU. When tuition fee is increased,

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