The state legistature has cut Gigantic State University\'sappropriations. GSU\'s

Question

The state legistature has cut Gigantic State University'sappropriations. GSU's Board of Regents decides to increase tuitonand fees to compensate for the loss of revenue. The board isassuming that the: A.demand for education at GSU is elastic. B.demand for education at GSU is inelastic. C.coefficient of price elasticity of demand for education atGSU is unity. D.coefficient of price elasticity of demand for education atGSU is greaterthan unity. The state legistature has cut Gigantic State University'sappropriations. GSU's Board of Regents decides to increase tuitonand fees to compensate for the loss of revenue. The board isassuming that the: A.demand for education at GSU is elastic. B.demand for education at GSU is inelastic. C.coefficient of price elasticity of demand for education atGSU is unity. D.coefficient of price elasticity of demand for education atGSU is greaterthan unity.

Explanation / Answer

Answer B. demand for education at GSU is inelastic. Explanation They assume demand is inelastic meaning the management assumes thestudents would pay an increased fee for education and the demandwon't go down.

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