Price Elasticity

The Board of trustees of a leading state university is faced with a critical

financial problem. At Present tuition rates, the University is losing $ 7.5 million
per year. The President of the University urges that tuition be raised $750 over
the present $3000 rate- a 25% increase. Based on the 10000 students now
attending the school, he projects that this increase would cover the $7.5
million shortfall in revenues.
Student leaders protest that they cannot afford a tuition hike; the president
responds that the only alternative is cut back significantly on programs and
faculty.
The students quickly realize that any appeal that involves compassion for
their plight is likely to fall on deaf ears. Their only hope is to demonstrate that
the tuition hike is not in the best interest of the university.
(A journal articles reveals that the elasticity for enrollment at state university is
1.3 with respect to the tuition charges)

1. If you are a student in that University, how do you convince the

management that the fee hike is not the best course of action to
increase the revenue.

Elasticity of demand
The Hind Books Ltd.is a publisher of romance novels nothing exotic or
erotic just stories of common people falling in and out of love . The
corporation hires an economist to determine the demand for its product After
months of hard work and submission of an exorbitant bill, the analyst tells the
company that demand for the firms novels (Qx) is given by the following
equation
Qx =12,000 -5,000Px +5Y +500Pc
Where Px is the price charged for the Hind Books novels ,Y is income per
capita , and Pc is the price of books from competing publishers .
Assume that the initial values of Px , Y and Pc are Rs. 5, Rs.10,000 and rs.6
respectively

You being a manager ,using this information, address the following:

1. Determine what effect a price increase would have on Total revenues
2. Evaluate how sale of the novels would change during a period of raising
incomes
3. Assess the probable impact if competing publishers raise their prices