When universities announce a large tuition increase and follow it with an announcement that more financial aid will be available, they are assuming that students who pay full tuition
A)have elastic demand and students who use financial aid have inelastic demand.
B)have inelastic demand and students who use financial aid have elastic demand.
C)view a college education as an inferior good and students who use financial aid view it as a normal good.
D)view a college education as a normal good and students who use financial aid view it as an inferior good.

Question

Quizplus · Accepted Answer

This strategy assumes that students who can afford to pay full tuition will continue to do so despite the price increase (inelastic demand), while students who rely on financial aid are more price-sensitive and might be deterred by higher costs without additional aid (elastic demand).

When Universities Announce a Large Tuition Increase and Follow It