Just a couple of years ago, policymakers in Ontario Canada noticed a rise in the

Question

Just a couple of years ago, policymakers in Ontario Canada noticed a rise in the number of deaths due to abuse of oxycodone, a prescription opiate. Research on the problem indicated that the drug was being overprescribed by doctors and making its way from pharmacies to a secondary "illegal" market. To address this problem, policymakers passed laws and guidelines dramatically restricting doctor's ability to prescribe the drug.

Heroin is also an opiate and is transacted in an "illegal" market. Naloxone is a legal drug that can be used to treat a heroin overdose, potentially saving the individual's life.

Illustrate and briefly explain the impact of this event on the "illegal" market for oxycodone, the market for heroin(an illegal opiate) and the market for Naloxone. Indicate the change in supply, demand, equilibrium price and equilibrium quantity using the words increase, decrease, uncertain, or no change.

Explanation / Answer

Since, Oxycodone is restricted by law, doctors will not write it so frequently, and thus, supply of this drug to medical stores will come down. But, it will be supplied to the illegal market and supply will increase in this market. Heroin is an illegal opiate and it will only be available in illegal market. Its supply in illegal market may come down due to increased supply of Oxycodone.
Demand and supply of Naloxone will increase to treat the problems caused by opiate. Thus, its equilibrium quantity and supply will both increase.
Price of Oxycodone will also increase due to its less availability to pharmacies.

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