Raise or Lower Tuition - Assignment Example

This would result into more revenues for the university. On the other hand, if the demand for the university is less than the number of available seats, a rise in tuition would result in lowering of the revenues (Mankiw, 2011). Due to lesser demand, the students would opt for alternate choices where the tuition is comparatively less. Answer 2 The revenue earnings of the university would vary depending upon the prevailing conditions of demand for the university and the number of seats available.

The revenues of the unity will rise when the demand for admission exceeds the number of seats available. The university would have the option to raise tuition resulting into higher revenue earnings. The revenue earnings of the university are likely to fall when the demand for university admissions is less than the number of available seats. Due to lesser demand, the university would have to reduce the tuition that would result into fall of revenue earnings (Marshall, 2006). Even stagnant tuition fees would lead to fall of revenue due to lesser number of students.

The revenues of the university are likely to remain same when there is equilibrium between the demand for university admissions and the number of seats available. . Due to the high demand for university admissions, there is large number of students available for enrollment. The students would be ready to pay more for their preferred university. This would positively impact the process of revenue earnings. The loss of revenue from the lower number of student enrollments is a scenario that can occur due to lower demand of university admissions against the number of available seats.

Due to lower demand, a hike in the tuition fees would cause lower number of students to enroll. The students would prefer other universities for which the process of revenue earnings would get affected. Answer 4 A negative price elasticity of the university indicates with the rise in the tuition fees, the demand for university admissions is likely to fall. Considering the situation when the price elasticity of the university is (-1.2), a rise in tuition fees of the university would result in considerable fall of demand of the university admissions.

The university has also been suffering with the revenue earnings in recent times. A further rise of revenue in such a condition would result in the further lowering of student enrollment (Schotter, 2008). This would result into lowering of revenue earnings for the university. In such a situation, the university would be suggested to lower the tuition fees in order to revive the situation of revenue crunch of the university in recent times. A reduction of tuition would draw more students for enrollment.

The students would want to take the advantage of comparatively low tuition fees. This would lead to expansion of revenue for the university. Answer 5 Being the President of NSU, the economic theories of supply, demand and price elasticity would be