The Economic Value of Main Report

Figure A9.1: Student demand and government funding by tuition and fees

Figure A9.2 shows another important reference point in the model – where state and local government support is 0%, student tuition and fees are increased to p'' , and CHE production is at Z% (less than 100%). The reduction in CHE s reflects the price elasticity of the students’ demand for education, i.e. , the extent to which the students’ decision to attend the college is affected by the change in tuition and fees. Ignoring for the moment those issues concerning the college ’s minimum operating scale (considered below in the section called “ Calculating benefits at the shutdown p oint”), the implication for the investment analysis is that benefits to state and local government must be adjusted to net out the benefits that the college can provide absent state and local government support, represented as Z% of the college ’s current CHE production in Figure A9.2.

Figure A9.2: CHE production and government funding by tuition and fees

To clarify the argument, it is useful to consider the role of enrollment in the larger benefit -cost model. Let B equal the benefits attributable to state and local government support. The analysis derives all benefits as a function of student enrollment, measured in terms of CHEs produced. For consistency with the graphs in this

The economic value of Monroe Community College

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