In my assessment, there would be raise in income at Nobody State University provided that there was an increase in tuition. Notably, it would have to reduce the number of enrolments so that there could be an increase in revenue. In line with this notion, in case they upsurge the tuition then that implies that the income will automatically reduce. This means that the Nobody State University (NSU) would not reduce the admission, it will not raise the revenue although it would escalate the admission fee the learners would remunerate to enroll. It is important to note if the institution could accumulate education fee from the fortunate families that can manage to pay for the tuition increment it would be at a constant level because the admission would declines as opposed to the revenue (The Revenue Elasticity, n.d). However, the prime objective of cost-related tuition is to maximize the tuition returns with the students being enrolled remaining constant. Therefore, tuition elasticity can be understood as the adjustment in learners' admission which is primarily attributed to the change in tuition.
Conditions under Which Revenue Will Rise, fall or Remain Constant
Income is as a result of cost and quantity demand. Therefore, supposing that in NSU, the link between price and demand is lower than -1 and the upsurge in the cost of 5% will cause to a reduction in interest of less than 5% (Wei, 2013). This state is called price inelasticity; thus, the increase in price when in this scenario will cause a rise in revenue.
The revenue would remain constant since there is an aspect of increasing tuition which in return will cause the pupils to reduce or drop out of the university due to the increased costs of enrolling in the college. Due to the price inelasticity, NSU should have maximized the price until the upshot in price results in a matching decline in demand (Wei, 2013). This can be understood through a condition known as unitary demand, in that, the subsequent increase in costs is corresponded by a later reduction in price and revenue remains the same.
Consequently, NSU could still increase the price irrespective of all elements. This condition would without a doubt attain the point of price elasticity, and as a consequence, there will be an increase in the price of 5% which would result in the rate of more than 5%. Therefore, the subsequent upshot in price will cause a decrease in revenue, and the demand will be inelastic.
Explain This Process, Focusing On The Relationship Between The Increased Revenue From Students Registering At NSU Despite The Higher Tuition And The Lost Revenue From Possible Lower Enrollment.
Away from tuition, there are numerous sources of income available for NSU; college tuition is the same as the manufacturers set the retail price, minimal items retail for the manufacturers recommended retail price; thus the same condition can be seen for university tuition. Notably, different elements come into play such as subsidies, grants, scholarships gifts, and earnings conglomerate to make up the total revenue for NSU. Subsequently, when tuition fee is amplified, it will lead to a positive influence on the overall revenue although this would cause a reduction in the enrolments thus having severe impacts on the total returns of the college.
Expansion of Revenue and Price Elasticity
To make the institution more attractive to university hopefuls, NSU should consider providing work-study strategies, advance the standards of living in the sleeping areas and engaging the students in the upkeep as well as possibly holding fundraising events that can be performed annually.
Consequently, the college regularly carries out several programs in the university for the students, some for education purpose while others are recreational events. Notably, these approaches are in most cases beneficial to the growth of students although some can be unproductive thus making the school incur preventable expenses (Epple, Romano & Sieg, 2008). In that, such programs need to be eliminated and work on the essential programs. This will without a doubt play a vital role in saving more funds hence increasing the university's revenue. More so, specific programs performed were duplicative due to the doubling of expenses. Therefore, the university should consider evaluating all programs and events to curb such cases.
NSU Presidential Solution
When an institution is experiencing financial constraints, the president is expected to have a high level of competency. Along with the incentives as mentioned above, as president of NSU, I would advise the institution to minimize the high costs by laying off some of the workers and have fewer employees. This is based on the understanding that, workers develop a more significant part of the expenses and their reduction would lead to increased revenues by the college (Hofacre, & Mahony, 2001). Another solution that I would recommend to the institution is that they should consider enrolling students from other states as opposed to the country the university belongs to. This suggestion is significant since learners from other nations or international students tend to pay more than the local students. Thus, admitting a majority of international students would lead to an increased revenue collection from the increased admission charges.
Epple, D., Romano, R., & Sieg, H. (2008). Diversity and Affirmative Action in Higher Education. Journal of Public Economic Theory, 10(4), 475-501. doi:10.1111/j.1467-9779.2008.00373.x.
Li, M., Hofacre, S., & Mahony, D. (2001). Demand, pricing, and revenue. In , In Li, M. |a Georgia Southern University (ed.), Economics of sport, Morgantown, W.Va., Fitness Information Technology, c2001, p.39-57;225-234.
The Revenue Elasticity. (n.d.). Modelling Corporation Tax Revenue. doi:10.4337/9781849804974.00010.
Wei, J. (2013). On Teaching Price Elasticity of Demand and Change in Revenue Due to Price Change - A Synthesis With and Without Calculus. SSRN Electronic Journal. doi:10.2139/ssrn.2366773.
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