The Board of Ursinus College

 The Board of Ursinus College in Pennsylvaniaraised its tuition and fees 17.6 percent to $23,460in 2000. It subsequently received 200 more applications than the year before. The president of thecollege surmised that applicants had apparentlyconcluded that if the college cost more, it must bebetter. Other colleges that raised tuition to matchrival colleges in recent years include University ofNotre Dame, Bryn Mawr College, Rice University,and the University of Richmond. They also experienced an increase in applications. In contrast,North Carolina Wesleyan College lowered their tuition and fees about 10 years ago by 22 percent andattracted fewer students. The college president concluded that it didnt work out the way it had beenhoped. People dont want cheap.You are hired as a consultant to a President of aliberal arts college in the East. You are asked toevaluate a recommendation by the collegesAdmissions Director, Susan Hansen, to increasetuition and to reduce financial aid to students.Susan argues that the data from competing collegessuggest that the demand curves for colleges slopeupwardthe quantity demanded increases withprice. Susan projects that the increase in tuition andreduction in financial aid will solve the schools financial problems. Last year, the college enrolled400 new students who each paid an effective tuitionof $15,000 (after financial aid), totaling$6,000,000. She projects that with the increaseddemand from charging an effective tuition of$25,000, the college will be able to enroll 600 newstudents (of equal or better quality), totaling$15,000,000. Evaluate Susans analysis andrecommendation.

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