Chapter 31 Question 026

Why are top-tier private universities not charging much higher tuition fees than second-tier private universities? (Lonnie Fox) According to the survey of "US News & World Report", the annual tuition difference of the top 100 private universities in the United States is quite limited.However, the demand for admission qualifications for first-tier schools is obviously much tighter than that of second-tier schools.For example, in recent years, the acceptance rate of first-tier schools for freshmen is less than 10%, while that of second-tier schools is over 50%.Top-ranked universities also have higher spending per freshman.So, since top universities are costly and in high demand, why aren't they charging higher tuition?

Although there may only be ten universities in the top ten at any one time, generally speaking, there will be at least fifty university presidents who firmly believe that if it is not for some flaws in the ranking formula, their school It deserves to be in the top ten.And relying on the dedicated efforts of all faculty, students and alumni, the principal does not need to spend a lot of effort to improve the school's external ranking.As long as the university reaches elite status, the above-mentioned groups will naturally reap handsome rewards. To be a viable candidate for such an elite university, a university must attract top-notch students.Many ranking formulas place a lot of weight on the average SAT score of a school's admitted freshmen.As a result, top universities have to compete fiercely for the most gifted students.The few students they give admission to are also courted by other leading universities.

Even if the annual tuition fee is $100,000, Harvard University has no problem recruiting enough high-quality freshmen.But if it charges such a high tuition fee, it can only attract a very limited number of outstanding students.Many parents will question, why spend $100,000 to send their children to Harvard University?Tuition at Princeton is only $40,000. Tuition only accounts for a part of the total cost of training a student, and in many cases, it is less than one-third.Much of the rest of the difference comes from donations and annual gifts from alumni and others.First-tier universities can afford higher costs because their endowment income is much higher than that of second-tier universities.

This result makes the tuition fees paid by students entering first-tier universities no higher than that of second-tier universities.Top universities do not charge higher tuition fees because: on the one hand, the most talented students are eager to enter top universities for advanced studies, but on the other hand, top universities also desperately need these students. The greatest value of a company lies not in the extent to which it may increase productivity, but in how much profit it actually creates. From a long-term perspective, the cost saved by new technologies will not bring higher profits to producers, but will lower the prices of products and benefit consumers.

The law of one price states that any supplier that tries to capitalize on the idea that wealthy people are willing to pay a little more creates an immediate profit opportunity for competitors. Demand for a particular product is a measure of how many people are willing to buy it. The supply of a particular product is a simple measure of how many producers are willing to offer that product for sale. A market for a particular product is in equilibrium when the number of consumers willing to buy the product at the prevailing market price equals the number of producers willing to sell it.This equilibrium price is also called the market clearing price.

To explain price or output fluctuations, it is incorrect to look only at the supply side or the demand side.