- âAnalyzing Managerial Decisions: Setting Tuition and Financial Aidâ
The Board of Ursinus College in Pennsylvania raised its tuition and fees 17.6 percent to $23,460 in 2000. It subsequently received 200 more applications than the year before. The president of the college surmised that âapplicants had apparently concluded that if the college cost more, it must be better.â Other colleges that raised tuition to match rival colleges in recent years include University of Notre Dame, Bryn Mawr College, Rice University, and the University of Richmond. They also experienced an increase in applications. In contrast, North Carolina Wesleyan College lowered their tuition and fees about 10 years ago by 22 percent and attracted fewer students. The college president concluded that âit didnât work out the way it had been hoped. People donât want cheap.â You are hired as a consultant to a President of a liberal arts college in the East. You are asked to evaluate a recommendation by the collegeâs Admissions Director, Susan Hansen, to increase tuition and to reduce financial aid to students. Susan argues that the data from competing colleges suggest that the demand curves for colleges slope upwardâthe quantity demanded increases with price. Susan projects that the increase in tuition and reduction in financial aid will solve the schoolâs financial problems. Last year, the college enrolled 400 new students who each paid an effective tuition of $15,000 (after financial aid), totaling $6,000,000. She projects that with the increased demand from charging an effective tuition of $25,000, the college will be able to enroll 600 new students (of equal or better quality), totaling $15,000,000.
Question 1. Evaluate Susanâs analysis and recommendation
Smith Jr., Clifford W.; Jerold Zimmerman; James Brickley. Managerial Economics & Organizational Architecture (Irwin Economics) ). McGraw-Hill Higher Education. Kindle Edition.
- âAnalyzing Managerial Decisions: Setting Tuition and Financial Aidâ
The Board of Ursinus College in Pennsylvania raised its tuition and fees 17.6 percent to $23,460 in 2000. It subsequently received 200 more applications than the year before. The president of the college surmised that âapplicants had apparently concluded that if the college cost more, it must be better.â Other colleges that raised tuition to match rival colleges in recent years include University of Notre Dame, Bryn Mawr College, Rice University, and the University of Richmond. They also experienced an increase in applications. In contrast, North Carolina Wesleyan College lowered their tuition and fees about 10 years ago by 22 percent and attracted fewer students. The college president concluded that âit didnât work out the way it had been hoped. People donât want cheap.â You are hired as a consultant to a President of a liberal arts college in the East. You are asked to evaluate a recommendation by the collegeâs Admissions Director, Susan Hansen, to increase tuition and to reduce financial aid to students. Susan argues that the data from competing colleges suggest that the demand curves for colleges slope upwardâthe quantity demanded increases with price. Susan projects that the increase in tuition and reduction in financial aid will solve the schoolâs financial problems. Last year, the college enrolled 400 new students who each paid an effective tuition of $15,000 (after financial aid), totaling $6,000,000. She projects that with the increased demand from charging an effective tuition of $25,000, the college will be able to enroll 600 new students (of equal or better quality), totaling $15,000,000.
Question 1. Evaluate Susanâs analysis and recommendation
Smith Jr., Clifford W.; Jerold Zimmerman; James Brickley. Managerial Economics & Organizational Architecture (Irwin Economics) ). McGraw-Hill Higher Education. Kindle Edition.