Economic Question (Price Elasticity of Demand)?

Question

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?

Answer 1

Prices will rise to a certain degree... and the demand for dorms will become inelastic

Answer 2

There would, of course, be more demand for a limited supply which always causes prices to rise.

Answer 3

The dorms will be considered perfectly inelastic...This means that if the University changes the price of the the dorms, the quantity of the dorms will still remain the same no matter what the price is.

Answer 4

If price elasticity is used to determine to what degree and when would students stop using on campus housing if pricing continued to rise then reducing alternatives would cause no drop off in demand.

Prices would no longer be naturally controlled by supply and demand. There would be no incentive to  voluntarily keep prices low but I suppose the University could make a compromise so as not to drive potential students away from the college all together.

Answer 5

To pay for all the Dorms they'd have to build who knows. Probably more programs would open up though.