If a university passed a rule stating that university students must live in university dormitories, what effect would this have on the price elasticity of demand for dorm space? what effect would this have on room rates?

The correct answer is the price elasticity of demand would be more INELASTIC, and room rates would increase .

Explanation:

Inelastic demand is that demand that is not very sensitive to a change in price. In this way, before a variation in the price the quantity demanded reacts in a less than proportional way. For example, if the price increases by 10% and in response the quantity demanded is reduced by less than 10%, then the demand is said to be inelastic.

There are several factors that determine the elasticity of demand at a given time. Here are some factors that tend to make demand more inelastic:

being born in poverty would limit the people's chances, opportunities and benefits.

this happen because of several things, such as:

- poor people tend to gain less access to good education and nutrition. this mean that their chance to obtain high paying jobs would also be limited.

- poor people tend to socialize with other poor people while the rich tend to socialize with other rich people. this means that simply throguh their social circle, rich people would have more business opportunities compared to the poor people.

- rich people tend to have more capital in their disposal. this would benefit them in business since it is far easier for them to fund their business operation compared to poor people.

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