Price Elasticity of Demand for Education at a Private University

Abstract

The purpose of this study was to determine the coefficient of price elasticity for the demand for education at a private institution of higher education. This coefficient indicates the effect of a change in tuition on tuition revenue. Enrollment and tuition data from 1959 to 1970 were used. During this period the coefficient was in the inelastic range; increases in tuition, therefore, resulted in an increase in tuition revenue. From 1959 to 1968, increases in enrollment due to non-tuition effects were an additional source of tuition revenue. From 1968 to 1970, however, enrollment declined but tuition revenue continued to increase. If this tuition enrollment pattern continues, the coefficient will become greater than 1 and tuition revenue will decrease. These results indicate that administrators of private institutions of higher education need to consider the effect of demand variables on tuition revenue as well as on enrollment.