Unit 1: University fees and elasticity of demand

When teaching price elasticity of demand, here is a good article on the BBC today on the effect of higher university fees on demand for higher education. Good for discussion of how PED will differ with respect to different types of consumer and for different types of universities, as well as the cross price elasticity of demand with foreign universities.


- Institutions have seen the biggest drop in applicants for 30 years because of the tripling of fees to £9,000.

- Of the 26 universities to have released figures, 15 reported a fall – with some seeing numbers down by more than 40%.

- Applications for university courses for 2012 are down 9% compared to those for this year, the admission service for students

- The number of applicants has fallen from 76,612 students at this stage for 2011 to 69,724 for 2012.

- Applications at City University are down by 41.4%, at Goldsmiths 35% and at Brunel 24%.

- There has been a growing interest in apprenticeships and school-leaver recruitment schemes run by professional firms as an alternative to university.

- Teenagers from poorer families appear on the initial evidence to be discouraged by the higher fees.

- More applicants are applying to universities closer to home, to save on other living expenses.

Keep in mind that these figures from UCAS are only a first publication with only part of the annual UCAS application cycle having been completed. The figures may also be affected by changes in the demographic profile of the 18-19 year olds applying this year. There will be fewer 18-year olds leaving school or college in 2012 than in 2011.

And demand for places may adjust once the new system of university fees becomes more widely understood - according to a press release from the Russell Group of leading universities, “With the introduction of English ‘top-up fees’ in 2006, applications decreased by 4.5% but were followed by a 7.1% increase in 2007 and a 10.1% increase in 2009.”