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.Given the information this provides about price elasticity of demand,what is the predicted effect on total expenditure on tuition fees?
A)total expenditure will decrease
B)total expenditure will decrease by 7%
C)total expenditure will decrease by 3%
D)total expenditure will increase
E)total expenditure will remain constant

Question

Quizplus · Accepted Answer

The price elasticity of demand is inelastic (less than 1) since a 10% increase in price leads to only a 3% decrease in quantity demanded. Therefore, total expenditure on tuition fees will increase.

Suppose an Analysis of the Possible Effects of Increases in University