Professor Torres is very upset. He found out that Delta College students pay $46 per unit and that his microeconomics class is a 3-unit class. This means the microeconomics class only costs the typical student $138 for the semester. Yet Professor Torres has discovered that students enrolled at the California CSU or UC systems and/or private colleges are paying an average price of $2,500 for the exact same class. (Fact: This is true). Now Professor Torres is steaming mad! He is upset that Delta College is selling his micro class for a cheap price.

Professor Torres now marches into the President's office at Delta College and is pounding his fist on the table asking that Delta College raise the price to match the prices that are charged elsewhere. Let's assume that Delta agrees to do price elasticity, income elasticity, and cross-price elasticity research on this request.

Conclusion:

Delta College has calculated that the price elasticity for microeconomics classes is 1.50 for the typical Delta College student given certain socio-economic factors. It has also calculated that Income Elasticity is +.99 and that Cross-Price Elasticity is +.40 . Will it be wise to raise the price of this microeconomics class?

A)This will be a dumb move because the college will get less total revenue because with a price elasticity of 1.50, the demand curve will be elastic or sensitive to price changes.

B)This will be a dumb move because move because although an Income Elasticity of .99 is technically a necessity, it is just one point away from being a luxury item and people quickly discontinue using luxury items especially if their incomes are not high.

C)This will be a dumb move because any Cross-Price Elasticity number that is positive means that it is a substitute good and this means that there are other suppliers (or colleges) that are offering competition. So the student has choices.

D)A, B, and C are all correct and it would be unwise for Delta College to raise the price of its microeconomics classes.

E)Professor Torres is such a nice person and I'd be willing to privately write him a check and pay $10,000 this semester to take his class. LOL!