A University Needs to Increase Total Revenue

question 16

Essay

A university needs to increase total revenue. The vice chancellor suggests that by raising fees for overseas students by 15%, total revenue will increase. However, after the fees increase, total revenue actually falls. What can you infer about the price elasticity of demand? Why is this likely to be true?

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Definitions:

Price of Coconuts

The market cost at which coconuts are bought and sold, influenced by supply, demand, and external market conditions.

Movement

In economics, it typically refers to a change in the price or quantity of a good or service in a market.

Decrease in Supply

A situation where the quantity of a good that producers are willing to produce and sell at a given price level falls.

Supply Curve

A graphical representation showing the relationship between the price of a good and the quantity of the good that suppliers are willing to produce and sell.