Question

I still don't understand how to calculate what the profit-maximizing tuition for full-time students? example when the cost for an additional unit is $125 and the part time students price elasticity is -2.5 and full time students is -1.8.

Answer 1

Im not sure I understand your question. In general, you want to set Marginal cost = Marginal revenue. You are given marginal cost. I don't think you can derive a marginal revenue from just a known demand elasticity. Further, its not clear from your question whether the school can price-discriminate -- that is, charge one price for full time, another for part time?

Do you have additional info you could provide?

Answer 2

Let me make a correction, we can approximate MR from an elasticity by the following formula MR=P*(1+1/e), where e is the elasticity.
So, we have, MC=125=MR=P*(1 - 1/1.8) for full timers. Solve for P. I get 281.25

Repeat for part-timers.

(I guess I would assume the school could price discriminate)