To raise or lower tuition at a University - Essay Example

The definition of revenue is actually total amount of money that a firm, in this case the university receives, from the goods and services it offers for sale. Average Revenue= TR/Q- This the total amount of fees paid by each individual student in the university. It’s the fee per student. Plot of these values on a graph will give us the demand curve of the university. If the students behave like rational consumers they will evaluate the effect of the rise in tuition fees on their gain in the institution.

As we can observe from the above curves, we can say that an increase in price will lead to a decrease in the goods consumed. This is the case with normal economic expectation from the students who we categorically say that they are normal and rational consumers of the good which is education. It is true to say that an increase in fees may lead to decline in the number of students because some may drop out of school due to lack of funds to further or complete their studies. This is a decrease in Total revenue TR for the University from TR1 to TR2.

This is actually because the price which is the tuition fees has increased from P1 to P2. This scenario the state university might loss revenues so if the students will behave like normal consumers they should reconsider that decision. An increase in tuition will also increase in revenue if the students do not withdraw their membership. Another scenario where the revenue may even escalate is when new students flood in to register as students of the university while the old ones retain their membership; this is because they associate the increase in tuition with an increase in services in the university.

In this case the University will register high revenue and thus if the situation is good and the students behave like that, they should increase tuition for them to earn more revenue. The revenue will remain the same if