MANAGERIAL ECONOMICS

Guided By: Prof. M. Dash

Presented By: Group Four
 According to Point Elasticity
No. of the student in the school = 6000 (Q1)
Tuition fee in the school = Rs. 150,000 (P1)
Tuition fee increased by 25 %
Therefore, tuition fee after hiking = Rs. 187,500 (P2)
No. of the students in the school after hiking fees = ??
(Q2)
Price elasticity of demand = -1.2 (ep)
Their present resource pool = Rs. 90crores
Their estimated resource pool = Rs. 112.5crores
As we know that,
dQ/dP . P/Q = ep
Therefore, dQ/37500 . 150000/6000 = -1.2
dQ = -1800
Therefore, no. of students after hiking the fees
= 6000-1800 = 4200 (Q2)
Therefore, after revenue would be
4200 x Rs. 187500
Rs. 78.75crores
From the above figure, we have
Percentage change in fees = 25%
Therefore, percentage change in strength of the
students = 6000 . X% = -1800
X = -30%
It implies that the strength of the student decreases
by 30%
Therefore, we can see that with a 25% increase in
fees leads to 30% decrease in strength of the
students.
CONCLUSION:

Prior to the implementation, resource pool

would have been Rs.112.5cr but after
implementing it would be Rs.78.75cr,
which is even less than the present
resource pool of school i.e. Rs.90cr.
So, as a managerial economist we would
not advice the school management to
implement the hike in tuition fee by 25%