20. In the past 30 years, the price of tuition at a 4-year private university has...

20. In the past 30 years, the price of tuition at a 4-year private university has increased at a fairly consistent 4% rate above inflation (i.e., the price of tuition is rising faster than the overall price level in the economy). During that same time period, enrollment in 4-year private universities has increased as well. Which of the following is consistent with being a primary factor in the observed changes in prices (tuition) and quantities (enrollment) at 4-year private universities.

a)Technological improvements that have decreased the cost of providing higher education

b)An increase in consumers’ beliefs about the value of a 4-year college degree

c)An increase in scholarships offered by public universities (a substitute for private universities)

d)A decrease in the salaries paid to adjunct faculty members (a type of instructor) at private universities

Expert Solution

Answer: b)An increase in consumers’ beliefs about the value of a 4-year college degree

A decrease in the cost of providing higher education happens to decrease the price of tuition.

As the entrollment in 4 year private universities have increased thus increase in scholarship isn't an option.

As the prices in universities have increased the salaries paid to the faculty must not have decreased.

Hence, As the belief of consumer increases in the 4 year degree, it leads to higher enrollment, which leads to higher demand resulting in an increase in the tuition fees at the university.

Rahul Sunny answered 2 years ago

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