QUESTION

a. Assume, with the arrest of heroin dealers, the police have

been successful in reducing the amount of heroin in the

market.Use demand and supply graph(s) and the concept

of the price elasticity of demand; explain the impact on the

price and quantity of heroin if the:

i. Demand curve for heroin is elastic

ii. Demand curve for heroin is inelastic.

b. If you owned a business, explain how you will apply the

concept of price elasticity of demand when setting price.