Author(s): Chad Denson
The responsiveness of consumers to a change in the price of a product is measured by the price elasticity of demand. The percentage change in the price is measured as (ending price € beginning price) / beginning price. The University of Mississippi (UM € Ole Miss) raised tuition (price) by 122% over 15 years through 2014 € from $3,153 in the year 2000 to $6,996, or by $3,843 - (6,996 €3,153) / 3,153 = 3,843 / 3,153 = 122%. Increase/decrease in the quantity demanded (student enrollment) is measured as (ending enrollment € beginning enrollment) / beginning enrollment. Total student enrollment was 11,405 in the year 2000 and 23,711 in the year 2014. This was a 108% increase € (23,711 € 11,405) / 11,405 = 12,306 / 11,405 = 1.08 = 108%. In spite of a 122% price increase, there was a 108% rise in students (quantity demanded) for UM. The price elasticity of demand for UM was calculated as 0.93, inelastic. The results imply that UM should raise tuition again to increase revenue.