Advanced Placement (AP)

Chad Barry

12 November, 11:16

Suppose a university decides to alter its tuition schedule by separating its students based on how many years of college they have completed. Most university programs require four years to complete. First-year students would get a 13% tuition reduction. Second-year students would pay the normal tuition. Third - and fourth-year students face an increase in tuition of 25 and 41%, respectively. Fully explain whether this pricing strategy is based on a sound understanding of price elasticity of demand, or not.