How much Tuition for college Students

Prepared by
Pooja
 Introduction
• The board of trustees of a leading state university is facing with a critical financial
problem
• University is losing $7.5 million per year
• Tuition fee be increased from $3,000 to $3,750
• $7.5 million shortfall can be recovered by 10,000 students studying there
• Student leader not in favor of increased tuition fee
• Faculty supports the tuition increases as a means of preserving their jobs

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 Case Analysis
• The elasticity for enrollment at state universities is -1.3 with respect to tuition changes
• 1% increase in tuition fee would decrease enrollments by 1.3%
• Increase of 25% tuition fee would result in decrease of enrollments by 32.5%
• By elasticity estimate,
Students Tuition fee(in Rs.)
10,000 3,000
? 3,750
e=(∆q/q) / (∆p/p)
-1.3=(x-10,000)*3000/10,000*750
x=6,750

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 Solution

University should not increase tuition fee

Incur a loss of 4.6 lacs if increased tuition fee to

3,750

Increase in the fee would result in the decrease in the

no of students

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Thank you