A university raises annual tuition by 2 percent. No other events have occurred, and the university's revenues have increased. It must be TRUE that
A) the associated change in quantity demanded was smaller than 2 percent.
B) the associated change in quantity demanded was equal to 2 percent.
C) the associated change in quantity demanded was greater than 2 percent.
D) there was no associated change in quantity demanded.

Question

Quizplus · Accepted Answer

If the university's revenues increased after raising tuition by 2 percent, it implies that the decrease in quantity demanded (if any) due to the price increase was not large enough to offset the revenue gained from the higher price. This means the change in quantity demanded was smaller than the percentage increase in price, allowing total revenue to increase.

A University Raises Annual Tuition by 2 Percent