As a policy analyst you have been asked to calculate the elasticity of demand for university courses. Questions 1 to 4 are based on the assumption that the universities that increased their fees by 30% experienced an overall decrease in student applications of 3%.
1. What is the price elasticity of demand for courses at the universities that increases their fees by 30%?
2. Is demand for these courses elastic or inelastic?
3. What factors do you think are responsible for this degree of elasticity?
4. Is tuition fee revenue likely to increase or decrease at these particular universities?
5. What is the cross elasticity of demand for courses at universities that did not increase their fees with respect to the prices of courses at universities that did increase their fees?
6. Are courses art different universities substitutes or complements