Alison Holt
Managerial Economics
MBA 540
Chapter 4 Case
Analyzing Managerial Decisions: Setting Tuition and Financial Aid

In 2000, Ursinus College raised its tuition 17.6 and fees percent to $23,460. After the fee increase, the college recognized an increase in applications by 200 compared to the previous year. There was an assumption by the college president that the applicants concluded the college must be better since its cost was more than others were. In addition, colleges such as the University of Notre Dame, Bryn Mawr College, Rice University, and the University of Richmond raised their tuition in order to match rival colleges, thus causing an increase in applications also. On the other hand, North Carolina Wesleyan College lowered their tuition and fees ten years ago by 22 percent; however, the decrease in costs only attracted a small number of candidates, thus determining the reduction in tuition and fees was not attractive to the students.
Susan Hansen, Admissions Director, at a liberal arts college in the East gave a recommendation to increase tuition and reduce financial aid to students in order to increase enrollment. Susan projects the increase in tuition and the decrease in financial aid will solve the school’s financial problems. Last year, the college enrolled 400 new students who each paid an effective tuition of $15,000 (after financial aid) totaling $6,000,000. Susan projects the increased demand from charging an effective tuition of $25,000; the college will enroll 600 new students, totaling $15,000,000.

As a consultant to the college of the East, I would propose that the recommendation given by Susan Hansen, Admissions Director be further analyzed. Susan argues that the data from the opposing colleges suggest demand curves slope upward, thus stating the quantity demanded increases with price (Brickley, Smith, & Zimmerman, 2009);