A Small Private University Normally Charges the Same Price-$600-Per Credit-Hour

question 128

Essay

A small private university normally charges the same price-$600-per credit-hour for all courses and for all students. While the university is pretty near capacity in the fall and spring, it finds that its classrooms are only about 70% occupied during the summer session. A student of operations management (who has recently read this chapter) wonders if yield management might be useful to both the university and its students alike. This student, with help from some economics majors, estimates a demand curve for summer course enrollment. Points on this demand curve include 7000 credit-hours at the current rate of $600, 8,000 credit hours at $500, 10,000 credit-hours at $400. Based on this demand curve, what price point would best serve the university, if its objective is the greatest revenue for the summer session?

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Definitions:

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