Using supply and demand analysis, i will try to explain the reasons for a rise in the price of cocaine.So,let's start.
Nowadays people start taking drugs more and more.
They become dependant on them and the price of drugs doesn't metter something. Cocaine is the sort of drugs, which is extremely popular even in England.
Cocaine is perfectly inelastic good, however it has substitutes, such is LSD or Heroin, but if person got used to it, he cant use another sort of drug.
Goverment has tried to reduce supply many many times, but people always find ways how to cheat goverment.
As time passes, lifestyle always changes, and tastes are not an exception. But we can't speak about tastes in drugs, because we don't use them. However, what we know for sure is that there is an economis crisis now and income of people has changed badly.
So, as i said, people start taking drugs more and demand increases. If demand increases, the price goes up and supply extends.
If drug addict person want to use drugs, then he must either die, because of lack of money, or work harder.
1. Elasticity
ReplyDelete2. Substitutes
3. Government action to reduce supply
4. Changes in taste, fashion, lifestyle, income
how is it now?
ReplyDeleteBetter but it is not daily.
ReplyDeleteNice one Lisa. But...wrong graph...you should use the one with two supply curves. Supply curve shift to the left because goverment reduce supply. Price went up but quantity did not change much because Cocaine is perfectly inelastic. Even the price raise, people who take drugs still need it. Let me ask you something. What is the disadventages to the goverment of Cocaine market enlarge? Think it in economic position. Give you some hins, why the goverment need to uses the idea of price elasticity?
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Times up.
Ans:You don't smoke but you drink Vodka, do you? Goverment can recieve a lot of tax form alcohol and cigarettes, but they cannot get any tax from drugs. If the market of Cocaine enlarge, more people would use their money on Cocaine instead of other production. Less people buy things, VAT(value-added tax) dicrease. Goverment would get less tax.
T,K.Joker