Many people expect to get at least an associate degree sometime in their lifetime. However, just some of them can really complete it without having to quit simultaneously. High tuition costs are the main reason people cannot continue going to college or university. Raising tuition can provide more revenue for the institution, but it can affect the enrollment of new students. On this exercise it will be discussed if raising tuition will result in more revenue, the conditions in under which revenue will rise, fall, or remain the same focusing on the relationship between the increased revenue from students enrolling at Nobody State University (NSU) despite the higher tuition and the lost revenue from possible lower enrollment. In addition, if the price elasticity were (-1.2) suggest how to expand the revenue and make recommendations to the University’s President.
There are many options were institutions can use to help increase their revenues. Some of this options can include the rise of tuition and tuitions fees. Raising the tuitions fees can have some negative consequences like the decrease on the number of enrolled students. “Establishing tuition rates at institutions of higher learning is always of fundamental strategic importance to college administrators who are suffering adverse financial effects from reduced allocations from external sources and increased educational and facility costs.” (Bryan, G. A., & Whipple, T. W. (1995). Nobody State University can consider to increase their revenue especially under a harsh economic satiation for the current society. Raising Tuition
Tuition fees are the best way to obtain revenue. Higher education is considered an investment, so the cost of tuitions, fees, books and everything else are considered and investment for the future. Nobody State University needs to rise the tuition cost, but first need to know how it can affect the revenue of the institution. Parents always expect that their child go to college to obtain a higher education. So despite the rise on tuition there still a higher demand on getting a higher education even when the tuitions and fees rise. Now, Nobody State University needs to determine how will affect the rise of tuitions and fees. The rise of tuition for NSU can affect the institution in both ways positively and negatively. It can cause a decrease in the number of applicants coming to the institution by making the institution less affordable and making the institution to lose revenue. Conditions in which revenue will rise, fall, or still the same There are many conditions in which the revenue of Nobody State University can change.
Price discrimination is a practice used to rise the revenue by separation sales on a unit by unit basis. “Some colleges charge in-state and out-of-state tuition because it is very easy to separate these two markets” (Amacher & Pate, 2013). By doing this the revenue of NSU can increase but it can decrease the enrollment of new students. Nobody State University can raise the tuition and fees and offer help for the cost of books and living expenses by offering free online access to the Universities Library and a discount for those that choose to live on campus, this is called opportunity cost that is sacrificing the production of something for something else, this way NSU can keep the revenue the same. Last but not least, rising the revenue is the hardest part for any institution since there are many aspect that have to be taken in consideration. For Nobody State University they will have to take in consideration the quality of services they offer before rising any tuition of fees. If the quality of services is high there will be no problem if they rise their tuition costs and fees. Relationship between the increased revenue from enrollments
Elasticity is the measure of the sensitivity, or responsiveness, of quantity demanded or quantity supplied to changes in price (Amacher & Pate, 2013). The tuition price elasticity is measure by the responsiveness of the number of students that enroll regardless of the tuition costs. The administration of Nobody State University can make a decision based on the responsiveness. Nobody State University will notice a decrease in enrollment and revenue if the rise in tuition costs cause the students to be sensitive to the increase in tuitions and fees. How to expand the revenue if the price were (-1.2)
Nobody State University price elasticity measures on the relationship of the number of students enrolled and revenues. Considering raising the tuition costs it has to be considered how will affect the number of students that will not be able to afford the number of tuition costs. “Elasticity measures how the dependent variable responds to changes in any one of the independent variables. The general formula to determine this responsiveness is, Elasticity = percent change in the dependent variable/ percent change in the independent variable.”(Amacher & Pate, 2013). If Nobody State University uses this formula to calculate it can find out the real price elasticity for the tuition costs. The value of a price is inelastic if the price is less than one and it will cause the revenue to fall. If the price is one, the tuition will stay the same. In other words, Nobody State University will be able to increase their tuition by a small quantity without affecting the number of enrollments. Recommendations to the University’s President
Based on the information above, Nobody State University will be able to rise the tuition by a small amount without affecting the number of enrollments coming to the institution. However, the increase will not create any revenue. The recommendations are to consider other ways to increase revenue instead of raising the tuition. An option to increase revenue for Nobody State University is to open online courses that can increase enrollment from people outside state and eventually will increase revenue. Also, the use of the different type of advertisements like radio commercials and online advertisements is a good way to increase enrollment and revenue. Offering the institution facilities to local business for any type of seminars or activities can also increase revenue. Clearly, the increase of tuition in not the only option to increase revenue for Nobody State University. If I was Nobody State University’s President
Trying to find way to increase the revenue for Nobody State University without affecting the institution is hard. First step would be to study the institution’s expenses and income. If there any expanse that can be cut that will be the first thing to do. Then will be the introduction of the online courses by offering to the new students and the already enrolled students. Rising the tuition will be the last option since trying to keep the institution as affordable as possible is the goal. Therefore, getting a higher education is a very important task for many people, but because many institutions rise their costs every year many students have to drop from collage because they cannot afford the costs. However, many institutions have to increase the tuitions to be able to keep going. Raising tuition can provide more revenue, but it can affect the enrollment of new students. Trying to find different options to increase the institutions revenue without affecting the cost of tuition is the goal.
Amacher, R., & Pate, J. (2013). Microeconomics principles and policies. San Diego, CA: Bridgepoint Education, Inc. Bryan, G. A., & Whipple, T. W. (1995). Tuition elasticity of the demand for higher education among current students: A pricing model. The Journal of Higher Education, 66(5), 560. Retrieved from http://search.proquest.com/docview/205336131?accountid=32521