Case 2

TUITION AND FINANCIAL AID 4

Student Signature:

The college's board of trustees informed the president that the school was losing students due to their tuition fees. They thought that tuition was too low. In 2000, the board voted to raise tuition and fees by 17.6 percent, including laptops for new students. The board watched for a while to see what would happen. Surprisingly, Ursinus enrolled almost twice as many applicants as last year. The freshman class size increased by 35% in four years, to a record 454 students. Applicants have concluded that a college that costs more is a more effective institution.

Ursinus has increased its financial help to just under $12.9 million, which indicates that most of its students pay less than half the tuition cost. The Ursinus College is an outlier. With the ratings and preferences of students influencing college prices, Notre Dame University, Rice University, Richmond University, and Hendrix College, only a few universities have dramatically increased their tuition to match their rivals while also providing additional assistance (Glater, Finder, 2006).

It is essential to understand that households equate price with efficiency and that a rise in cost will draw more students and profits. As a result of these and other factors, health care costs have been rising faster than inflation, and many individuals are spending less than the full price for health services.

Tuition at private, not-for-profit, four-year universities; the cost has risen 81 percent from 1993 to 2004, far more than double the inflation rate, while university based financial aid soared 135 percent.

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Consultant’s Task

Susan projects that tuition will increase, and financial aid will decrease, thereby solving its economic problems. Last year, the college registered 400 new students, each paid basic tuition of $15,000, totaling $6,000,000. She estimates that by including increased tuition of $25,000 for first-year students, the college will be able to enroll 600 new students, totaling $15,000,000.

Should you choose to accept it, your assignment is to evaluate Susan's response and recommendation (Brickley, Smith, & Zimmerman, 2016,)

Elasticity and Inelastic Demand

The level of demand reacting to a shift in another economic factor concerns inelasticity and demand elasticity.

Susan Hansen, director of admissions, proposes raising school fees to future students and reducing financial support. Susan believes that if colleges are more expensive than other educational institutions, the college or university should be better than the other institutions at a lower cost. Susan relies on rival universities' statistics and efforts to enhance her teaching. The level of demand reacting to a shift in another economic factor concerns inelasticity and demand elasticity.

Susan Hansen, director of admissions, proposes raising school fees to future students and reducing financial support. Susan believes that if colleges are more expensive than other educational institutions, the college or university should be better than the other institutions at a lower cost. Susan relies on rival universities' statistics and efforts to enhance her teaching. We feel that customers have more bargaining power than we have.

To reduce the university's financial difficulties, Susan plans to recruit additional students with an increased education cost.

One can see, as a consultant, that the research conducted by Susan is faulty because it is not reliable information and does not prove in any way that theoretically, an increasing fee for tuition will lead to an increase.

The following are Susan's analyzes of the increase and fall in funding for university education and how demand could affect:

The degree to which demand reacts to a shift in another economic factor refers to inelastic and elastic demand.

The Director of Admissions, Susan Hansen, proposes increasing student tuition and reducing their financial aid. Susan believes that if the college is significantly more expensive than other educational institutions, then the college must be a better academic institution than the others at a lower cost. Susan bases her claim on the statistics from her competitor's extent to which they raise their tuition. She believes that if a product is expensive, people associate it with quality.

Susan still intends to recruit more students with an increase in school tuition to reduce the university's financial viability.

Susan’s research is flawed because it is not reliable information and is not conclusive proof that a rise in tuition fees will increase enrollment.

From the data collected, Susan has summarized the increases in college tuition and the drop in financial assistance and what this means for college demand.

Law of demand: ῃI = [∆ Q/ (Q1+Q2)/2] / [∆I (I1+I2)/2]

ῃI = [200 / (400+600)/2] / [10,000 (15,000+25,000)/2]

= 0.8

Although the price is low, the demand for such a product is inelastic, and as such, there would still be no reductions in the amount of educational expense.

Price elasticity will range from zero to infinity. If the demand is completely inelastic, then the quantity requested will not be affected by price changes. If the price elasticity is infinite, a modest price increase will result in customers giving up on buying all the goods and services (Brickley, Smith, & Zimmerman, 2016).

The homogeneity of demand tests how demand responds to shifting economic news. When demand for a product decreases due to an economic factor, it is inelastic (Hall, 2019). Early analyses on school elasticity (e.g., Brewer et al. 1999; Corazzini et al. 1972) used the term ' net-price ' to call attention to the differentiation between the institution's education and the financial assistance received; but much recent research (e.g., Buss et al. 2004; McPherson and Schapiro 1991; St. John 1990; St. John and Starkey 1995) consider the impact of school and financial assistance separately, considering the effects of tuition on enrollment have proven to be different from those (Shin, Milton, 2007).

Susan expects to determine how such a price hike might impact how responsive a product might be in relation to income. She has no way of understanding how her choices will affect not only her future students but her current students as well. Susan is of a mind that families tend to equate price with superiority and that a tuition rise, followed by discounts, can lure more applicants and revenue, has helped produce an economy in academia like what happened in the medical industry, with fees rising quicker than inflation but with many buyers paying less than full price.

Susan will have to provide a compelling argument as to why her college is significantly more significant in terms of academic achievement and personal experience than any other college in the country.

Financial expenses for individuals interested in attending a college or university seem to have become a key component in determining where to go, particularly for the middle class or lower-income families.

Conclusion: Managerial Decisions

U.S. universities are competitive and watch each other. An example, in 2006, the Swarthmore Board of Directors' Finance Committee reviewed a list of applied courses, rooms, and boards at more than 30 highly ranked colleges and universities. They were greatly surprised to find that Swarthmore charged less than most other similar schools (Glater, Finder, 2006).

Establishing the Objective

The most beneficial step in the managerial decision-making process is defining the desired goal of the college. Efforts of any business, non-profit, or for-profit should focus on maximizing revenue.

Defining the Problem

Step two in the managerial decision-making process is defining the problem or identifying the issue. It is essential to determine the complexity of the case, and later this will allow for resolution.

Identifying Possible Alternative Solutions (i.e., Alternative Courses of Action)

Once the issue is identified, alternate means to solve the problem need to be found. Based on certain assumptions, there are numerous potential solutions to the problem. In this instance, the Admissions Director, Susan Hansen, made only one solution: increasing tuition and decreasing financial aid.

The consultant reminds Susan that since 1996, Muskingum College has reduced its tuition and fees by over $6,000. Revenue increased, illustrating the addition of new and larger student enrollment. Muskingum has increased its enrollment tremendously from less than 1,000 to over 1,600 students (Glater, Finder 2006). Furthermore, tuition increases may not always automatically lead to an increase in enrollment. For the last ten years, North Carolina Wesleyan College has lowered their tuition and fees by 22% per year. However, the program attracted fewer wealthy applicants and more poor ones, who needed more significant financial assistance even as the tuition generated from applicants declined.

Evaluating Alternative Courses of Action

The next phase in managerial decision-making is to consider possible alternatives. This includes the compilation and interpretation of the data in question. The solution in this scenario is not to do anything. Susan's only information is based on her argument that data from competing universities and their attempts to increase their tuition. She also based the opinion on the assumption that people equate outstanding quality with premium prices.

Next, you must decide between potential alternatives, including compiling data, summarizing it, and integrating it. The solution is not to pursue the matter further. Susan has only information about what the competing universities have been doing and how they have been trying to increase their tuition. She based her view on the belief that individuals equate premium prices with outstanding quality.

To protect the client's financial bottom line and reputation, the consultant advised the college that increasing tuition is acceptable. Their rivals are doing the same with no negative repercussions but reducing financial aid would be a substantial financial blunder. It is one of the few aspects that all universities have in common. Decreasing financial aid may increase the college's financial problems if the reduced financial aid does not compensate for the increase in other expenses.

Implementing the Decision

TUITION AND FINANCIAL AID 5

Execution of the decision is the final step. The implementation of the judgment requires substantial analysis to achieve the expected results of the desired action plan. Limitations to applying the increase in employment, such as federal laws and regulations, may exist. In this study, equilibrium concepts represent significant constraints on managerial decisions, such as the interplay of supply and demand in the product, labor, and capital markets. A vital management capacity is to know how values and amounts change in response to changes in pricing, commodity specifications, or terms of sale (Brickley, Smith, & Zimmerman, 2016).The final step is the execution of the decision.

References

Brewer, D. J., Eide, E. R., & Ehrenberg, R. G. (1999). Does it pay to attend an elite private college? Crosscohort evidence on the effects of college type on earnings. Journal of Human Resources, vol., 34, Iss.1, pp. 104–123.

Buss, C., Parker, J., & Ribenburg, J. (2004). Cost, quality, and enrollment demand at liberal arts colleges. Economics of Education Review, vol.23, pp. 57–65.

Corazzini, A. J., Dugan, D. J., & Grabowsk, H. G. (1972). Determinants and distributional aspects in the U.S., higher education. Journal of Human Resources, vol.7, issue.1, pp. 39–59.