Nearby College has done a study of college enrollments and has concluded that the number of students in the fall term is give by
Q = 5000 - .5T + .1Y + .2Tc
Where Q = number of students enrolled full-time, T = tuition charged by Nearby, Y = national GDP in billions and Tc = tuition charged by Competition College, a school across town.
a. Determine enrollment if T = $14000, Y = $7500 billion and Tc = $16000. Determine elasticity of demand for Nearby at this tuition rate.
b. The admissions office of Nearby proposes an advertising campaign, designed to convince potential students that it is and underrated educational bargain. The cost of the campaign is set at $4,500,000. Nearby's admission office thinks that this will change demand to Q = 7500 - .4T + .15Y + .2Tc If the admissions office is correct, how many students will enroll next fall? What is demand elasticity at the new enrollment? Is the advertising campaign cost effective?