If there was any time for me to find an article comparing college pricing to Black Friday sales, this would be about that time. If you’re at all familiar with how businesses price their good, you’ll know that most of the time, whenever there’s a sale, the business really doesn’t lose any money on that particular product.
It’s like if you walk into J.C.Penny to buy your mother a necklace that’s marked at $72. You walk up the counter with it and the sales clerk says, “Hey, you saved 78% on this item. Lucky you!” but in reality, they never really meant to sell that item for whatever the original price was. In fact, that necklace probably only cost $15 to make and they sold it to you for $20. It’s also how video games can go from $60 to $20 in a matter of months if the game doesn’t sell very well. It’s all about finding that price that consumers are willing to buy at.
So what does this have to do with college pricing? Well, it’s all the same practice. People like to think they’re getting a good deal, so say if students are offered a lot of financial aid for that particular school, the school will continue to raise the tuition to keep up with demand and achieve the desired profit margin, or maximum profitability. On the flip side though, schools may also try to lower tuition, while at the same time lowering aid, to achieve the same effect. Throw in some government subsidization and the schools will just simply use it as a safety cushion.
Now you’re probably thinking, “that’s pretty crooked.” It is, in a way, but you must realize that this is how a free market economy is supposed to work. It’s not supposed work for or against anybody. It’s just supposed to work. And who allows it to work? The consumers do. We have an absurdly high demand for a specific product here — education — and the colleges are the producers that provide this. And like in any capitalistic economy, the demand sets the price of this product (the supply is constant in this case, so it doesn’t really matter), so the prices will continue to rise until the demand changes.
“But they’re taking advantage of us!” you say as you seethe with unbridled fury.
That’s because we allow them to. It’s human nature to want to play of people’s ignorance, and that’s what colleges are doing here. But if we became more knowledgeable consumers and did our research before buying into what colleges try to sell us, they can’t take advantage of us now, can they?
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