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Chapter 4 “Analyzing Managerial Decisions: Setting Tuition and Financial Aid”

Evaluate Susan’s analysis and recommendation.

Considering what Ursinue, University of Notre Dame, Bryn Mawr College, Rice University, and University of Richmond did, they increase tuition and their applications increased. When North Carolina Wesleyan College lowered their tuition and fees about 10 years ago by 22 percent and attracted fewer students. (Brickley, Smith, & Zimmerman. p. 124) Susan argues that the demand curves for college slope upward – the quantity demanded increases with price. As a consultant being hired to help Susan, one of the first things I notice is the contradiction of the law of demand. The demand curves generally slope downward – individuals purchase less (or certainly no more) of a product as the price increases. (Brickley, Smith, & Zimmerman. p. 123) we normally don’t see individuals buying more of something when the price is higher unless there is no substitution for what they are looking for or the substitutions are or less quality. As the college presidents stated “People don’t want cheap.” It would not be prudent to give a fair and accurate consult on Susan’s theory based on the above data without considering all other data. I myself have just witnessed several individuals apply for college and all had different reasons on why they chose their colleges. Yes number one reason was the cost of tuition. Other reasons were location, prestige of the university, and family alumni. I have found with my daughters in college that with the higher tuition school a higher financial aid package is available. Financial aid is one of these factors that are affecting the demand in individuals applying to colleges. My daughters are paying almost half of what college is asking in tuition due to financial aid support. I would not be able to approve Susan’s recommendations. Susan projects that the increase in tuition and reduction in financial aid will solve the school’s financial problems. There are many more factors out there that will affect a student’s choice of college a better financial assistance package is one that will attract a student to that school. Costs of living on campus or near it, transportation to and from college, and social finances, these are just some of the factors Susan needs to take in to consideration. It would be better for Susan to re-evaluate her ideas of increasing tuition without considering these other factors.

Reference:

Brickley, J., Smith, C., & Zimmerman. (2016). Economists' View of Behavior. In Managerial economics and organizational architecture (6th ed.). Chicago: Irwin.