1. Over the last decade, the U.S. has relied on two strategies to combat the use of illegal drugs, reducing the flow of drugs into the country and educating people of the harmful affects of drug use. We want to consider how the market for illegal drugs is affected by these changes. A. Assume the space below shows the market for illegal drugs, before the interventions noted above. Label both axes and all lines/curves. Indicate initial equilibriums with 0 subscripts (Po, Qo). B. Clearly show the shifts in supply and demand (if any) and the new equilibrium price and quantity. Properly label everything. Label new lines and new equilibriums with 1 subscripts (P₁, Q1, D₁, S₁). C. Given the changes you found above, is it possible that the price of illegal drugs could have fallen due to these interventions? If it is possible, which intervention needs to be more successful? If it is not possible, explain why both interventions will increase the price of illegal drugs.

1. Over the last decade, the U.S. has relied on two strategies to combat the use of illegal drugs, reducing the flow of drugs into the country and educating people of the harmful affects of drug use. We want to consider how the market for illegal drugs is affected by these changes. A. Assume the space below shows the market for illegal drugs, before the interventions noted above. Label both axes and all lines/curves. Indicate initial equilibriums with 0 subscripts (Po, Qo). B. Clearly show the shifts in supply and demand (if any) and the new equilibrium price and quantity. Properly label everything. Label new lines and new equilibriums with 1 subscripts (P₁, Q1, D₁, S₁). C. Given the changes you found above, is it possible that the price of illegal drugs could have fallen due to these interventions? If it is possible, which intervention needs to be more successful? If it is not possible, explain why both interventions will increase the price of illegal drugs.

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter17: Externalities And The Environment

Section: Chapter Questions

Problem 2.7P

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