The University engaged a consultant to perform a price sensitivity analysis on the willingness (ability) of the families of college-bound students in the tri-state area to purchase a college education. The survey technique used two reference points: a $410 price/credit hour and a $335 price/credit hour. After analyzing the survey results along with population statistics in the region, the consulting firm estimated that approximately 22,000 credit hours would be purchased at $410 and 42,300 credit hours would be purchased at $335.

With the assistance of the University Accountant and the Physical Plant Director, the University management realized that a $250 credit hour fee did not provide sufficient funds to provide teaching facilities for more than 23,600 credit hours. However at a $435 credit hour rate, the team estimated that incremental improvements could be made to the physical plant so as to accommodate approximately 56,000 credit hours.

The University officials and the marketing consultant agreed that in this first attempt at modeling the credit hour demand and supply relationship, it would be appropriate to assume that the functions were linear.

You have been called in as the "modeling consultant" on the project and have been asked to make a recommendation to the University management team as to the appropriate tuition price so that there are sufficient funds to meet the expected enrollment demand as dictated by the price. Your report should include your recommended tuition price, a graph illustrating your findings, Goal Seek work to support your graph and an explanation of your work.

Instructions:

1. Equations for the supply and demand functions. (Let Excel do

the computational work for you.)

2. A graph of the supply and demand curves. (Be sure that your

q-values are reasonable for the given problem, your graph is labeled appropriately and you have "zoomed-in" on the market equilibrium.)

3. Goal Seek work to find the market equilibrium exactly.

4. A written recommendation to the University management team, including your recommended price and justification of why this price is appropriate. (Explain to the University management team, in complete sentences, what you've done to solve the problem and what they should look for in the worksheet and on the graph to support your recommendation.)

Names: # Credit Hours Demand Price ($/credit hr) Supply Price ($/credit hr) |Supply = Demand DEMAND DATA POINTS Quantity Price Demand slope Demand equation SUPPLY DATA POINTS Quantity Price Supply slope Supply equation Recommendation: