Economic concepts....?

Question

Your school has decided to increase the intake of new students next year. What economic concepts would your school consider in reaching its decision? Would the school make its decision at the margin? Give examples.

Answer 1

Perhaps, capacity utilization of available resources both physical ( staff/faculty strength, accomodation at class rooms and library etc) and financial resources may have been weighed first to increase the intake. Secondly, to augment financial resources by way of fees this decision may have been taken.

Answer 2

The decision to increase the intake of students next year would have been madfe using the following concepts:

1. costs- incremental costs both fixed and variable costs.

Fixed costs would include costs if any on additional classroom construction, additional furnitures/ desks etc,  while variable costs would include payments to additional teachers to maintain optimal student-teacher ratio or additional payments to teachers and evaluators, electricity and stationery consumption.

Then the additional revenue would have been larger than the additional costs. The additional surplus generation or the additional profit generation are then calculated and ratio of additional profit per unit of additional fixed costs to ensure that decision generates adequate rate of return on the additional capital  is high enough to justify the decision in comparision to alternative rates of return on capital available in the market. This is a variant of profit maximization principle.

2. revenue - incremental (marginal revenue)

3. demand for school seats at different amount of fees for the students

4.