Complete/Correct Question:
A local community college charges lower tuition fees to local town residents than to nonresidents. This pricing strategy increases the profits of the community college. Using this information, we can conclude that nonresidents must have a ________ for attending the community college than residents.
a. lower demand
b. less price-elastic demand
c. greater demand
d. more price-elastic demand
Answer:
B, less price-elastic demand.
Explanation:
Price elasticity of demand is the degree to which the quantity demanded of a product is affected by its change in price. It can be simply said to be the change in demand as against the price changes.
When the price of a product increases, the demand for such goods reduces. On the other hand, when the price of a product reduces, demand for such good increases.
For the above question, the residents of the community have lower tuition compared to the non-residents. This means that for non-residents to attend this community college, the non-residents must have a less price-elastic demand. It means that non-residents are less likely to attend the community college because of the increase in price.
Cheers.
In conclusion, the non-resident must have a less price-elastic demand for attending the college than residents.
Less price-elastic demand refers to demand that does not increase as result of reduction in price and an increase in price does not hurt the demand either.
For instance, the reduction in the tuition fee of the non-resident will not increase the college demand over the resident.
Therefore, in conclusion, the non-resident must have a less price-elastic demand for attending the college than residents.
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