The price elasticity of demand for higher education is about 1.4. A 5% increase in tuition would lead to
A) a decrease in enrollment by 7%.
B) a decrease in enrollment by 6.4%.
C) a decrease in enrollment by 3.6%.
D) a decrease in enrollment by 2.8%.

Question

Quizplus · Accepted Answer

The price elasticity of demand formula is % change in quantity demanded / % change in price. Given an elasticity of 1.4 and a 5% increase in tuition, the expected decrease in enrollment is 1.4 * 5% = 7%.

The Price Elasticity of Demand for Higher Education Is About