A university conducts a survey of students, which shows that a 10 per cent tuition fee hike would lead to a 12 per cent decrease in enrolments. If the university wants to increase its total revenue, it should _______ tuition fees because the demand for education at this university is _______.
A) not raise; inelastic
B) not raise; elastic
C) raise; inelastic
D) raise; elastic

Question

Quizplus · Accepted Answer

The demand is elastic because a relatively small increase in price (tuition fees) leads to a larger percentage decrease in quantity demanded (enrollment). Therefore, raising prices would decrease total revenue, indicating the university should not raise tuition fees.

A University Conducts a Survey of Students, Which Shows That