Conducts aerial spraying of the country coca fields

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Colombia and Peru are two of the leading coca leaf producers in the world. In both these countries, a substantial fraction of people who work on coca fields are children. Suppose that the Colombian government conducts aerial spraying of the country's coca fields, destroying half of its coca crops. Use the competitive market framework to argue the following:

(a) In Colombia, coca prices will increase and quantities will decrease.

(b) In Peru, coca prices will increase and quantities will increase.

(c) In Peru, wages in the agricultural sector will increase and child labor will in- crease.

(d) In the US, the size of the cocaine market (in dollars terms) will increase as long as the demand for cocaine is sufficiently inelastic.

Reference no: EM133128288

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