Suppose an analysis of the possible effects of increases in university tuition fees predicts that a 10% increase in tuition fees will result in a 3% decline in enrolment.What is the implied price elasticity of demand for university attendance?
A)0
B)0.3
C)3
D)7
E)10

Question

Quizplus · Accepted Answer

The formula for price elasticity of demand is: 
% change in quantity demanded / % change in price

We know that a 10% increase in tuition fees will result in a 3% decline in enrolment, which means:
% change in quantity demanded = -3%
% change in price = 10%

Plugging these values into the formula for price elasticity of demand, we get:
-3% / 10% = -0.3

The negative sign just indicates an inverse relationship between price and quantity demanded (as price increases, quantity demanded decreases). Therefore, the implied price elasticity of demand is 0.3.

Suppose an Analysis of the Possible Effects of Increases in University