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110 Part 2 Managerial Economics ANALYZING MANAGERIAL DECISIONS: Setting Tuition and Financial Aid The Board of Ursinus College in Pennsylvania raised Admissions Director, Susan Hansen, to increase its tuition and fees 17.6 percent to $23,460 in 2000. It subsequently received 200 more applications than tuition and to reduce financial aid to students, the year before. The president of the college surmised argues that the data from competing colleges that the demand curves for colleges slope upward Fig Thi that "applicants had apparently concluded that if the on college cost more, it must be better." Other colleges the quantity demanded increases with price, Sy He raised tuition to match rival colleges in recent projects that the increase in tuition and reduction the th servinclude University of Notre Dame, Bryn Mawr in financial aid will solve the school's financial pu Com Rie University, and the University of lems. Last year, the college enrolled 400 new stuff be Kind mad They also experienced an increase in who each paid an effective tuition of $15,000 applications. Is contrast, North Carolina Wesleyan financial aid), totaling $6,000,000. She project College lowered their tuition and fees about 10 years with the increased demand from charging an offer ago by 22 percent and attracted fewer students. The tuition of $25,000, the college will be able to this college president concluded that "it didn't work out 600 new students (of equal or better quality), tos the way it had been hoped. People don't want cheap." ing $15,000,000. Evaluate Susan's analysis and You are hired as a consultant to a President of a recommendation. liberal arts college in the East. You are asked to evaluate a recommendation by the college's SOURCE: Jonathan D. Glater and Alan Finder (2006), "In Twat Tuition Game, Popularity Rises with Price," nytimes.com (December 12). Elasticity of Demand