An economics professor once recommended that his university, which was in financial trouble, charge seniors a graduation fee. The professor recognized that demand for diplomas among college seniors is likely to be
A) infinitely elastic.
B) unitary and unaffected by a graduation fee.
C) totally elastic and willing to expand as needed to meet the budgetary needs of the institution.
D) indefinable.
E) very inelastic because there are few substitutes for that college's diplomas at that point in time.

Question

Quizplus · Accepted Answer

Seniors who are about to graduate have invested a significant amount of time and money into their education and have limited options for obtaining a diploma from another institution at that point in time. Therefore, the demand for diplomas among college seniors is likely to be very inelastic, meaning that a graduation fee would not significantly reduce the number of seniors willing to pay for a diploma. This would provide a source of revenue for the university to help with its financial troubles.

An Economics Professor Once Recommended That His University, Which Was