The university you attend needs to increase total revenue. The president suggests that by raising tuition by 5%, total revenue will increase. However, after the tuition increase, total revenue actually fell
What can you infer about the price elasticity of demand for an education at your university? Why is this likely to be true? What did your university president assume to be true about the price elasticity of demand for an education at your university?
If after tuition increased total revenue fell, then the demand for an education at your university must be price elastic. It is likely to be price elastic because there are many substitutes for an education at this particular university and tuition represents a large share of an individual's income. The university president assumed that the demand was price inelastic.
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