Econ 6301 Applied Microeconomic Theory

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READING ASSIGNMENT #2

Ch 3 Demand

Reading: “What is the Price Elasticity of Housing Demand?”

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Eric A. Hanushek and John M. Quigley

The Review of Economics and Statistics

Vol. 62, No. 3 (Aug., 1980), pp. 449-454

Read the above article and answer the following questions.

  1. Describe the paper’s conceptual framework.  Do you agree with this framework? What are some of its limitations?
  2. Describe the model used to estimate housing demand. 
  3. Work through the math described in the paper to make sure that you know how the authors obtained equations (4) and (5).  What are the main differences between equations (4) and (5)?
  4. Briefly describe the data from the Housing Allowance Demand Experiment.  Why are these data good for this study? What are some of the limitations of the data?  How do you think these issues might affect the results?
  5. Describe the empirical results.  Why do the long-run and short-run price elasticities differ?
  6. How do the results in this paper differ from results found by previous studies? Why?
  7. Would the results from this study hold in today’s market?  Discuss.
 
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