In Part 1, students will hypothesize about whether or not tuition is elastic or inelastic and why. In Part 2, students will calculate the elasticity of demand using the numbers given.

[latex]\begin{array}{rcl}\text{Percent change in quantity}&=&\large{\frac{9,000-10,000}{{19,000}\div{2}}} \\ \text{Percent change in price}&=&\large{\frac{$4800-$4000}{{$8800}\div{2}}} \\ {\text{Price Elasticity of Demand}}&=&\large{\frac{-1,000/9,500}{$800/$4400}}\\&=&\large{\frac{-.10}{0.18}}\\&=&-0.55 \end{array}[/latex]

This is inelastic. Total revenue will increase because a given % rise in price will cause a smaller % fall in quantity. Total revenue in this example increases from 40 million to 43.2 million.