Supply, demand and equilibrium, Microeconomics

Case 1: The market for drugs

Supply, demand, and equilibrium: The market for drugs.

Suppose the market for drugs is a perfectly competitive market.

Let the supply curve S be upward sloping, for instance:

S: p = 500 + 112 . y,                where p = price and y = quantity.

Consider two versions of the demand curve; the demand curve Dl is vertical (quantity does not v~ with the price) and the demand curve D2 is downward sloping. For instance:

Dl: y = 1000,                            D2: p = 2000. 000/y -1000

Suppose the authorities have 3 goals concerning the drug market:

Gl : A reduction in the consumption of chugs.

G2 : A reduction of the drug-induced criminal activity.

G3 : A :reduction of the emergence of organized crime connected with the (illegal) sale of drugs.

a) Give the three goals Gl, G2 and G3 some interpretations within this framewo:tk, given that the market for drugs is a competitive market.

(U se diagrammatic explanations and/or the specifications of Sand D1 and D2 given above.)

Suppose the authorities have 4 policy-instruments at their disposal:

PI : Increased punishment and/ or increased probability of getting caught for drug-pushers.

P2 : Legalize the sale of drugs.

P3 : Distribute drugs for free.

P4 : Decrease the demand for m.'1lgs.

b) What could be the interpretations of PI - P4 within this model?

c) Discuss (at least) some of the consequences ofP1 - P4 on Gl - G3, if either Dl or D2 is valid.

Posted Date: 3/8/2013 4:21:39 AM | Location : United States

Related Discussions:- Supply, demand and equilibrium, Assignment Help, Ask Question on Supply, demand and equilibrium, Get Answer, Expert's Help, Supply, demand and equilibrium Discussions

Write discussion on Supply, demand and equilibrium
Your posts are moderated
Related Questions

Suppose scientists discover that eating soybeans prevents cancer and heart disease

how to make attractive assignment on theory of supply

Crumble Corporation produces cookies. Here is the relationship between the number of workers and output (in dozens of cookies) in a given day: Workers Output Marginal Product T

WITH reference to incidence taxation,explain with the help diagrams,who bears the incidence of taxation when the demand for a commodity is perfectly inelastic, perfectly elastic an

Consider an upstream firm in Russia that mines iron ore at a total cost of $15 q , where q is the number of tons of ore. This upstream firm then ships ore to Germany for processi

run a s monopoly how will this benefit stakeholders involved, such as the goverment, businesses, and consumers?

trend and structure of national income in nigeria

1. Econ 415 Project Select one time series of real data. The series can be selected from the published data ( The data series must co

Concepts of Income and Substitution Effects:   Change in demand for a good due to one unit change in price of that good for given prices and money income is known as own price