An illegal drug is price inelastic because it is addictive. What will be the impact of...
An illegal drug is price inelastic because it is addictive. What will be the impact of efforts to reduce the supply of this drug? Why might efforts to reduce the supply be more effective for drugs that are less addictive?
Homework Answers
A good is inelastic in nature if change in price of the good does not affect its quantity demanded much.
Goods which are addictive in nature tend to have inelastic demand because changes in prices of those goods do not deter users from consuming it
As one can see, a fall in supply of drugs due to drug control will shift supply curve of drugs to the left.
In case of inelastic demand, the fall in supply does not reduce quantity sold much, while in case of elastic demand, fall in supply reduces quantity sold of drugs by a large quantity.
This means supply reduction works more in case of goods having elastic demand.
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