Suppose a university decides to raise tuition fees to increase the total revenue it receives from students.This policy works only if the demand for a university education
A)is unit elastic.
B)is inelastic.
C)is elastic.
D)has a price elasticity greater than 1.
E)is perfectly elastic.

Question

Quizplus · Accepted Answer

If the demand for a university education is inelastic, then the percentage increase in tuition fees will lead to a smaller percentage decrease in the number of students who enroll. This means that the total revenue received from students will increase even with the hike in fees. If the demand were elastic or perfectly elastic, then the increase in fees would lead to a significant decrease in the number of students who enroll, resulting in a net loss for the university. Therefore, option B is the best choice.

Suppose a University Decides to Raise Tuition Fees to Increase