Every year, thousands, if not hundreds of thousands, of students apply to each college. Each of these schools has a student cap-- a limit to the number of students that they can admit. There are many schools around the country with unbelievably low acceptance rates (such as the Ivy League schools: Harvard, Yale, Princeton, etc.) We often hear the acceptance rates at these schools are ~5 percent. However, I think that in terms of economics, simplifying the ratio of students applied to students accepted causes us to lose important information. So, let's take Harvard, and let's look at their actual ratio of students accepted to students applied. Out of almost 40,000 applicants, just over 2,000 were accepted.
Let's think about these numbers from a supply and demand standpoint, assuming that Harvard can only accept 2,000 students. Clearly, Harvard has a surplus of students applying (hence the low acceptance rate.) For Harvard, this is ideal. The Board of Admissions very well knows that they are not going to accept anywhere near 40,000 students. So, one might ask, why don't they accept more people? Or better yet, why don't they tell fewer people to apply? The answer: Harvard is a business. Each of the 40,000 applicants pays $75 to apply to their school. Individually, this may not seem like a huge amount of money. Any aspiring high school student would easily pay $75 to apply to their dream college (thus, admission fees are inelastic) as they see it is an investment for their future. However, Harvard's net gain from this is $3,000,000. This means that Harvard is paid $2,850,000 from students who they decline.
Oftentimes, high school students complain about the college process being unfair. They will say things like "I just don't get why..." and I believe that there is an explanation for this. Colleges are businesses. Regardless of what they plan on using it for, they want to make money. As students, when traversing the extremely stressful college application process, it is important that we remember that fact.
Subscribe to:
Post Comments (Atom)
Namibia's Economy
Namibia is a country that not many people think about. It is a small nation, right above South Africa, that bases most of its economy on to...
I thought this was a good analysis of the economics of college admissions. Not only do the colleges get to keep the money from college applications, but they also get to select better students, bettering their reputation and increasing the amount of students who will apply next year. I also remember reading that the University of Chicago used to have a much higher acceptance rate because less people applied but, after a "rebranding" and switching to the Common Application, the amount of students who apply increased, decreasing the acceptance rate. From the standpoint of a business, this makes perfect sense, since they are able to get more profit from applications.
ReplyDeleteI really like how you explain the college admissions process through identifying multiple economic principles. I have never thought about how much money a prestigious college can make off the simple application fee.
ReplyDeleteThis is a very relatable blog post, since most of us are currently spending quite a bit of money to just apply to a couple of colleges. Building off your example of a student who is dead-set on applying to Harvard and will spend any quantity of money to fulfill that dream, their price-elasticity coefficient would be zero, and a graph indicating their perfectly inelastic demand would be a vertical line (an undefined slope).
ReplyDelete