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Setting Tuition and Financial Aid

In: Business and Management

Submitted By fherrero25
Words 591
Pages 3
Setting Tuition and Financial Aid
Managerial Economics
09/15/2013

The idea behind “applicants had apparently concluded that if the college cost more, it must be better” (Brickley, Smith, & Zimmerman, 2009) is still a premise that society perceived as accurate but the financial problem behind this idea is if students are not receiving the help needed with a financial aid increase, it feels that this idea will not hold up very much longer.
Susan’s analysis that the increase in tuition fee is likely to increase in the student enrollment and therefore would be helpful in solving the school’s financial problem is absolutely incorrect. Financial aid is an important factor when students are thinking about applying for a college. College education is getting more expensive every year and if they cannot afford to attend, they will most likely not apply, therefore the College need to think about the implications of this action. “Higher education, like any business, must listen to the “voice of the customer” in pricing deliberations” (Kurz & Scannell 2005).
Susan is using the law of demand, which rising the price would work however she needs to take other factors into consideration. Education being a normal good cannot have an upward sloping demand curve and therefore Susan’s assessment that demand is upward sloping and hence tuition fee has to be increased is misleading. The fact that other colleges have seen increase in enrollment with increase in tuition fee is not because demand curve is upward sloping but because their colleges are very high in demand in terms of education. The reasons for high demand for enrolment in a particular college or university could be huge placement opportunities, better study environment, prestige of college, existence of hostel and accommodation facilities, proximity to town, high opportunities for extra-curricular activities,...

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