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1. Consider the price elasticities of demand from Model 2 in Panel A. Write three statements that interpret these 3 elasticities. [5] 2. Are the
1. Consider the price elasticities of demand from Model 2 in Panel A. Write three statements that interpret these 3 elasticities. [5] 2. Are the signs of the estimated elasticities what you might expect? Briey explain for each. 3. Does the estimate of overall price elasticity of demand for cocaine from Model 2, panel A, suggest that demand is elastic or inelastic? Briey explain. [5] 4. Do the estimates from Table 5.6 suggest that youth demand for cocaine among cocaine users is elastic or inelastic? Is this what one might expect? Briey explain. [5] 5. Compare die participation elasticity for past-year use vs. past-mondr use for Model 2, Panels A and B. Given the differences in the time horizon, are these elasticities what one might expect? Briey explain. [5] 6. If nes for cocaine possession increased such that the price of cocaine douhled, what would he the percentage change in quantity demanded of cocaine among cocaine users according to the estimate in Model 2, Panel A? [5] T. The overall price elasticity of the demand for cocaine among adults was 43.5, about half of that for young people. If policy makers increased the sanctions for cocaine possession, thereby raising the price of cocaine, would this price change have a greater effect on adults or on youths? Briey explain. [5]
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