Effectiveness of demand side policy

Reference no: EM1315636

Using a basins supply and demand model, one can illustrate the impact of different policies for curbing illegal drug consumption.

a. Describe in your diagram a policy aimed to imprison illegal drug users and dealers in order to reduce the supply of illegal drugs, bearing in mind that the vertical axis represents the price of drugs and horizontal axis the quantity demanded or supplied of drugs. In other words, you can show which curve is shifting, the supply curve or the demand curve.

b. Discuss the upshot of this policy in terms of a new equilibrium. Is this policy likely to have a negative repercussion on the crime rate? Can you come up with an idea concerning a major drawback of this policy?

c. The opposing policy, called the demand side policy, attempts to advertise he harmful effects of drug consumption to the public and to provide drug addicts with rehabilitation facilities. Which curve will this policy cause to shift? What is the consequence of this policy? Discuss the advantages and the shortcomings of this policy.

d. Do you think the effectiveness of these policies is related to the elasticities of the supply and demand curve?

Reference no: EM1315636

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