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Governments are keen to discourage the use of dangerous and addictive recreational drugs, such as heroin and methamphetamine. Most governments prohibit production and sale of
Governments are keen to discourage the use of dangerous and addictive recreational drugs, such as heroin and methamphetamine. Most governments prohibit production and sale of these drugs (i.e., outlaw them) and also support education programmes to warn especially younger people that it's unwise to get involved with these drugs. Use a supply- demand analysis to investigate the effects of these two market interventions on the market for these drugs. Set up your model under the assumption that initially there are no interventions, i.e., that the drugs are legal and there is no government sponsored information/education campaign. Note that the addictive nature of these drugs has an implication for the slope of the demand curve. What is that implication? Illegal (supply shift) Education (demand shift) What's the effect on market P and Q of a well-conceived and executed education campaign? Explain. What's the effect on market P and Q of outlawing the drug. Sellers' revenues
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