Question: Are rent rates influenced by the student population in a college town? Let rent be the average monthly rent paid on rental units in

Are rent rates influenced by the student population in a college town?

Are rent rates influenced by the student population in a college town? Let rent be the average monthly rent paid on rental units in a college town. Let pop denote the total city population, avginc the average city income, and pct.stu the student pop- ulation as a percentage of the total population. One model to test this relationship is: log(rent) Bo + Blog(pop) + Blog(avginc) + B3pctstu+ u (a) State the null hypothesis that size of the student body relative to the popula- tion has no ceteris paribus effect on monthly rents. State the alternative that there is an effect. (b) What signs do you expect for 3 and 3? (c) The equation estimated using data is: log(rent) = 0.043 +0.066log(pop) +0.507log(avginc) +0.0056pct.stu (0.844) (0.039) (0.081) (0.0017) n = 64 R = 0.458 Is the statement "A 10% increase in population is associated with about a 6.6% increase in rent" correct? Explain. (d) Test the hypothesis in part (a) at the 1% level.

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