Question

ssume that neighborhood A and B have experienced the same trend in ouse price in the past years. Say neighborhood A receives funding to mprove the quality of their school system, while neighborhood B does not. Assume that neither neighborhood experiences a change in property axes at any point in time. Before this policy took place, the average house price for neighborhood A was $250,000 while the average house price for neighborhood B was $300,000. After the policy, the average ouse price for neighborhood A is S360,000 while for neighborhood B is 400,000. How much of the change in the house price of neighborhoodA can be explained by the change in the quality of public schools caused by he additional funding in public schools?

Answer 1

Initial average house price for neighborhood A = $250,000

New average house price for neighborhood A = $360,000

percentage change in the average house price = $(360,000 - 25,000)/$250,000 *100

= 0.44

So, we can say that 1 unit change in the quality of public schools can increase the average house price in neighborhood A by 0.44 * unit change in the quality of public schools in neighborhood A.