Some US private universities offer entrance scholarships to low income people. Explain why this might increase...
Some US private universities offer entrance scholarships to low income people. Explain why this might increase university profits?
Homework Answers
Ans) Price discrimination is when seller charges different price for same product from different buyers. Now, a scholarship program can be seen as a way of price discrimination. The marginal cost of enrolling extra student is very less and hence, University can expand customer base.
Universities charge handsome amount from rich students or those who can easily afford the education there. To attract poor students, whose paying capacity is less, University offers scholarships. By offering scholarship, seller is trying to extract as much as possible from people with different paying capacity. This in turn, increases University's profit.
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