In a study commissioned by the College, consultants
estimate that an increase in the comprehensive fee from $19,550
to $20,550 would cause the number of returning students to drop
by 2.3%. Also, it would reduce applications for next year's class
from 1600 to 1440.
a) Estimate and interpret the elasticity of demand
for the returning students.
b) Estimate and interpret the elasticity of demand
for applicants.
c) Comparing these elasticities, do they seem reasonable?
Explain.