Problem 2
What effect would a rule stating that university students must live in university dormitories have on the price elasticity of demand for dormitory space? What impact might this in turn have on room rates?
Problem 3
The income elasticities of demand for movies, dental services, and clothing have been estimated to be \(+3.4,+1,\) and +0.5 , respectively. Interpret these coefficients. What does it mean if an income-elasticity coefficient is negative?
Problem 4
Research has found that an increase in the price of beer would reduce the amount of marijuana consumed. Is cross elasticity of demand between the two products positive or negative? Are these products substitutes or complements? What might be the logic behind this relationship?
