The president of Lebanon Valley College proposed the following tuition program: provide a 50 percent tuition reduction for those graduating in the top 10 percent of their high school class, 33 percent reduction for those in the top 20 percent, and 25 percent reduction for those who finish in the top 30 percent. All scholarship recipients were also required to maintain a minimum GPA. The comptroller estimated that the elasticity of demand for these students was greater than 1.
a) Economics Professor Paul Heise recommended that the president institute the program, arguing that it would increase revenues. What was his argument?
b) Why did the program distinguish among top-performing students?
c) Why didn't the president reduce tuition for all students?