Question

Explain how making something illegal (like sex, booze or drugs) impacts the quality, quantity and price of the illegal substance or activity. In addition, are there any unintended consequences of making drugs illegal that can cause harm to people? Why would anyone want to interfere with transactions between two willing people each of whom gain from trading in booze, or drugs or sex?

Answer 1

Government imposes varieties of regulations and restrictions on illegal activities. Thus, such trade can not be practised in open. Hence, lesser quantity can be traded in such market, and due to fear of being convicted for illegal trade, sellers tend to charge higher price. There are no consumers rights, so quality is likely to fall.

Such activities or illegal activities have negative externalities for society. Drugs and other such things create friction and conflict in society, so people are negatively affected by such activities.

In order to avoid, negative externalities , there must be restrictions on such activities, so intervention is required to stop such economic activities.