Problem Set

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Me1 Problem Set #2 The US College Enrollment and the “Third Law of Demand” A theorem proposed by Professors Alchian and Allen in their text, University Economics (1964) has had several rebirths of interest in the literature. The so-called “third law of demand,” or “relative price theorem,” holds that a fixed cost added to a good of varying quality causes the consumer to prefer the category considered of higher quality to the lower. Recently a number of studies, keeping this theorem in mind have looked into a relationship between the ratio of public to private enrollment and unemployment in cross-sectional as well as in time series data. Part of the full cost of participating in higher education is foregone employment income. In their…show more content…
Tables 2 and 3 show a clear distinction between the two genders. Table 2 Dependent Variable: Enrollment Ratio for Males (t values in Parentheses) State Level Data Repressors Coefficient Estimates CONSTANT 9.032 (1.196) UNEMPLOYMENT 0.8753 (0.539) UNEMPLOYMENT SQUARED 0.0l0 (0.409) INCOME -0.00008 -(0.354) FINANCIAL AID -0.1065** -(1.618) TUITION RATIO -5.4489 -(0.565) POPULATION -0.0029* -(1.881) N= 51, R2 =0.1503 ,F =1.297 Table 3 Dependent Variable: Enrollment Ratio for Males and Females (t values in Parentheses) State Level Data Repressors Coefficient Estimates Females Males CONSTANT -286.542 9.032 -(1.210) (1.196) UNEMPLOYMENT 99.510* 0.8753 (1.956) (0.539) UNEMPLOYMENT SQUARED -1.187* 0.010 -(1.491) (0.409) INCOME 0.01515** -0.10008 (2.240) -(0.354) FINANCIAL AID -4.4702** -0.1065* -(2.165) -(1.618) TUITION RATIO -114.185 -5.4489 -(0.378) -(0.565) POPULATION -0.0636 -0.0029* -(1.296) -(1.881) N 51 51 R2 0.2171 0.1503 F 2.034 1.297 **0.05 level of significance * 0.01 level of significance

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