A university conducts a survey of students, which shows that a 10 percent tuition hike would lead to a 7 percent decrease in the enrollment. If the university wants to increase its total revenue, it should ________ tuition because the demand for education at this university is ________.
A) raise; elastic
B) not raise; elastic
C) raise; inelastic
D) not raise; inelastic

Question

Quizplus · Accepted Answer

The demand is inelastic because the percentage decrease in enrollment (7%) is less than the percentage increase in tuition (10%). Raising tuition would increase total revenue since the loss in revenue from fewer students is less than the gain from higher tuition per student.

A University Conducts a Survey of Students, Which Shows That