One of the major mistakes made by government is to assume that a price increase always leads to revenue increases:
At the same time, out-of-state students could be looking at significantly larger tuition bills. …
Some of the out-of-state hikes were already set by the legislature last year, which mandated 12.3 percent increases at UNC-Chapel Hill, N.C. A&T, UNC Wilmington and UNC School of the Arts. Lawmakers enacted 6 percent hikes at 10 other campuses, including East Carolina and N.C. Central universities.
The legislative move was unusual in that it bypassed the Board of Governors, which sets tuition annually for the state’s public universities. On Thursday, UNC officials said they would seek to repeal the legislative increases, because the hikes could negatively affect some universities’ ability to attract talented students from outside North Carolina. …
The higher demand is likely to support a higher price tag, Woodson said. …
UNC-CH Chancellor Carol Folt said the campus conducted market research that showed the 12.3 percent increase could result in a 10 percent reduction in applications from out-of-state and perhaps a 20 percent decrease in those who choose to enroll. Still, the campus Board of Trustees has asked for a 2.5 percent increase on out-of-staters.
It’s unclear whether UNC will succeed in its effort to get the legislature to repeal the hikes.
The demand for enrolling at UNC by out-of-state students is elastic since the percentage change in quantity demanded (20) is greater than the percentage change in price (12.3). A small price increase will lead to a larger decrease in quantity demanded and revenue will fall (if the market research is sound).
The North Carolina legislature's tuition increase for UNC, intended to raise revenue, would actually it. Lower revenue for UNC would justify additional budget cuts … so maybe the NC legislature knows what it is doing!
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