Consumption of harmful, addictive drugs such as heroin has long been a concern o

Question

Consumption of harmful, addictive drugs such as heroin has long been a concern of citizens and governments. Authorities often try to deal with the problem by declaring a war on the drug producers and distributors; significant resources are devoted to stopping the supply of drugs from reaching the streets, and heavy fines and jail sentences are imposed on identified producers and sellers. What is true of the price elasticity of demand for addictive drugs? What effect does the war on drugs have on the market supply of addictive drugs? Given your answer to these first two questions, what are the predictable consequences supply-orientated policies for [a] the quantity of drugs consumed on the streets, and [b] the street price of drugs?

Explanation / Answer

Addictive drugs are quite price inelastic. Once an individual gets used to a drug then the person will do whatever it takes to find that drug irrespective of high the price is.

The war on drugs will decrease the market supply of drugs as the stock of drugs will get destroyed.

Two predictable consequences of this war on drug will be –

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