Examine each of the two scenarios below and answer:

(A) Assume that the demand for crack cocaine is inelastic and that users get the funds to pay for crack cocaine through theft and prostitution. Suppose that the government increases penalties on suppliers of crack cocaine and thereby reduces supply. What will happen to the amount of crime and prostitution engaged in by crack cocaine users? What will happen in the market of security services and brothel houses? Explain and illustrate your answer using a diagram each for the crack cocaine market, security services market and brothel houses. [4 marks]

(B) The Australian constitution allows the federal government to make laws with respect to "the acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws," which is known as "compulsory acquisition." This essentially means that if the government wants your land or your stuff, they can take it provided they give you "fair market value" for your property. As a result, you are made no worse off as a result of the government seizing your property, since you will be fairly compensated. Is this true? Justify. [2 marks]