2. The Department of Housing and Urban Development (HUD) has used housing subsidies as one of its principal tools for guaranteeing adequate housing for low-income families. An economist at HUD estimates that a 20 percent drop in the price of housing will stimulate an increase in demand for low-cost housing approximately by 12 percent in 2003. With this information, calculate the price elasticity for low-cost housing, and interpret this number for a non-economist.

Suppose the President has set a target of increasing low-cost housing consumption by 35 percent (compared to 10 million). Based on the price elasticity you calculated above, what percent drop in price is required to meet this goal? (3 points