1. Suppose the government regulates the prices of beef and chicken and sets them below their market clearing levels. Explain why shortages of these goods will develop and what factors will determine the sizes of the shortages. What will happen to the price of pork? Explain briefly.
2. In a discussion of tuition rates, a university official argues that the demand for admission is completely price inelastic. As evidence, she notes that while the university has doubled its tuition (in real terms) over the past 15 years, neither the number nor quality of students applying has decreased. Would you accept this argument? Explain briefly.
(Hint: The official makes an assertion about the demand for admission, but does she actually observe a demand curve? What else could be going on?)