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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?

Respuesta :

osondumartins

Answer:

(1) The price Elasticity of demand for Dormintory space will less than one.

(2) The room rates will increase following the increase in demand.

Explanation: The price Elasticity of demand is a term used in Economics to describe the change in Quantity demanded at the slightest change in price of the product or services rendered. FOR A NECESSARY AND ESSENTIAL GOODS AND SERVICES WITH NO CLOSE SUBSTITUTES LIKE THE DORMITORY SPACES THE PRICE ELASTICITY OF DEMAND WILL BE LESS THAN ONE.

THIS MEANS THAT A CHANGE IN PRICE WILL HAVE LITTLE OR NO EFFECT ON THE DEMAND.

One of the conditions necessary for a change in price is a change in demand, as the demand for a product or service increases, it will lead to a corresponding increase in the price of the product or service especially when the supply for the product or sevice is constant.