Appeal to Out of State Students

Many “undistinguished state institutions”have recently experienced a significant decline in demand causing a notable decline in enrollment. In order to raise the demand, some colleges are considering cutting the out-of-state surcharges entirely. However, because of the revenue raised from admitting out-of state-students and charging them additionally, the colleges must be able to enroll at least 50% more out of staters to maintain the revenue that the college generated beforehand. The rise in out-of-state students is anticipated with an increase in costs as the marginal cost will be above zero to accommodate the spike in enrollees. However, though the marginal cost is kept low, it may be too much to run a successful university. The article goes to explain that international and out-of-state students are more inclined and have been proven to be drawn to flagship state universities with higher surcharges as the students consider the value of these more recognized schools to the less expensive schools. The supply of the “undistinguished” schools appeals to draw more people in at a lower cost, but the demand does not change. The marginal benefit of attending a more┬árecognized state school overrides the monetary cost and benefit of the cheaper schools and therefore, the demand for the former type of universities remains high and fairly inelastic.

 

http://www.forbes.com/sites/ccap/2016/11/28/price-competition-comes-to-higher-education/#4b75fc9825f7

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