Parents are today choosing to send, or not to send, their child to alternative schools
based partially on the price of doing so. The model incorporates a price elasticity of
demand parameter to project the likely behavior of parents sending their children to
alternative schools, as the price changes. Based on this wide body of research on related
quantities, and some limited data on demand for alternative and traditional public school
services, we have used a price elasticity of demand of 1.0 in this model. 94
While it is impossible to know the actual price elasticity of demand, there is a small
amount of data showing that a financial incentive of approximately $1,000 will, in
present-day Michigan, induce parents to send their child to alternative schools.95
Economic theory also holds firmly that parents have a strong desire to send their children
to better schools, since it increases their "human capital" and thus their
earning power for the future. Since we know that a significant number of parents already
send their children to an alternative school—all the while paying twice—we
cannot avoid the fact that many consumers in this market perceive the value of an
alternative school education very highly.
