Exercise 4. For the following questions, please refer to Table 5.6 excerpted from the chapter "The Demand for Cocaine and Marijuana by Youth" (Frank J. Chaloupka, Michael Grossman, and John A. Tauras) in the NBER volume The Economic Analysis of Substance Use and Abuse: An Integration of Econometrics and Behavioral Economic Research, University of Chicago Press, 1999. Table 5.6. Estimated Price Elasticities of Youth Cocaine Demand Model 1 Model 2 A. Past-Year Use, 1982 and 1989 Sample Participation -0.902 -0.875 Conditional Use -0.400 -0.393 Total -1.302 -1.268 B. Past-Month Use, 1982 and 1989 Sample Participation -0.996 -0.963 Conditional Use -0.459 -0.447 Total -1.452 -1.410 C. Past-Year Use, 1989 Sample Participation -0.268 -0.239 Conditional Use -0.330 -0.347 Total -0.598 -0.586 D. Past-Month Use, 1989 Sample Participation -0.255 -0.235 Conditional Use -0.447 -0.494 Total -0.732 -0.729 (Chaloupka, Grossman, and Tauras 1999) Panels A and C reports the price elasticity of demand for cocaine use in the past year Panels B and D report the price elasticity of demand for cocaine use in the past month The elasticity for "Participation" refers to whether someone used cocaine at all (in the past year or the past month) and the elasticity for "Conditional use" refers to the number of occasions of cocaine use, among those who used cocaine (in the past year or the past month). The elasticity for "Total" refers to overall cocaine use among all individuals in the sample (users and nonusers).Answer the prompts below. 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 the participation elasticity for past-year use ys. past-month 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] E. If nes for cocaine possession increased such that the price of cocaine doubled, what would he the percentage change in quantity demanded of cocaine among cocaine users according to the estimate in Model 2, Panel A? [5] .7. 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]