Students+On+Edge+Over+Rising+Tuition+-+Jackie+Wittich

Title of Article: Students On Edge Over Rising Tuition Source: **http://www.cbsnews.com/stories/2010/02/02/national/main6164634.shtml** Date: **Feb 20, 2011** Explanation: In most parts of the United States, colleges are increasingly rising in tuition due to the fact that states are struggling with their budget cuts following the economic meltdown. College board states that families are paying about $172-$1096 dollars more this year, and numerous states around the country are enforcing extremely large percentage increases on tuition due to budget deficits (California, up by 30% in residential undergrad fees!) However, despite this increase in price, the demand for colleges remains relatively just as high for families around the country.This is a result of the fact that college, for most people, is an inelastic good. This means that price changes will not result in a significant change in the quantity demanded. It does not readily follow the Law of Demand, which states that demand of a good will decrease if its price increases. Therefore, as the article implies, state colleges do not fear a drop in revenue, because the price inelasticity of college means that an increase in price most likely will increase total revenue. As noted in a normative statement made by Mike Sarb: "[people] complain that the school's taking advantage of people (by raising tuition)." This year's statistics also show that while the tuition percentage has increased, so has financial aid. The positive side of this, of course, is that people who cannot afford the increase in tuition can still go to college. THowever, those that are not qualified for financial aid are complaining that a portion of the additional money is going into a state 'reserve' to improve student services and to provide for need-based financial aid.

Vocabulary:
 * Demand: the relationship between the quantity demanded of a good or service and its price.
 * Quantity Demanded: The quantity demanded is the amount of a product people are willing to buy at a certain price
 * Law Of Demand: The Law of Demand states that, all other factors being equal, an increase in the price of a good or service will result in a decrease in demand of that good or service.
 * Price Elasticity: Price elasticity is the measure of responsiveness of the quantity demanded of a good or service after it has experienced a change in price.
 * Inelastic Good: A good or service that experiences little or no significant change in demand after a change in price.
 * Normative Statement: **a normative statement**  expresses a value judgement about whether a situation is subjectively desirable or undesirable
 * Total Revenue: Total revenue is the total money received from the sale of any given quantity of output.

**Graph:**

Caption: The increase in price of college tuition has little or no impact on quantity demanded, therefore the total revenue is increased.

**Evaluation:** I believe that given the economy at its current state, states who have had budget deficits are entitled to raising tuition for state colleges because the state itself is what provides for the facilities of the colleges themselves. This method in raising the price for college will most likely increase total revenue of college funds, and help colleges maintain their facilities because college is an inelastic good. This means that while increased tuitions might cost significantly large amounts of money for families, most will concede to it because college education is becoming such a nescessity. However, if college tuitions continue to rise, I believe that eventually there will be a point where the demand for college will begin to decrease (as noted by the Law of Demand) because people simply cannot afford it. This would upset the market equilibirum of college prices, because the quantity demanded for college tuition would not fulfill its hieghtened price, and perhaps result in a surplus of college 'seats'. Therefore, the purpose of increasing tuition would be backfired, because the total revenue would decrease instead of increase. As a solution to this problem, I believe that there should be an agreed 'union' price for all colleges nation-wide so that prices can begin to stabilize between states. For example. in Florida, the state has issued a statement that college tuitions will only increase per year until it reaches the nation's average.