Essay Sample on Illegal Drugs: Inelastic Demand Drives Up Costs & Spending

Inelasticity of demand for illegal drugs increases the costs of making the drug more difficult for consumers to get. The elasticity of demand is essential as it helps in understanding the effects that punishment has on different suppliers of the drugs. Inelasticity of illegal drugs increases the costs that suppliers incur; hence they become expensive to the consumers, yet due to their addiction, their total spending on them increases.

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In the case of illegal drugs, when demand is inelastic, excise taxes, and other techniques of persuasion causes the drugs to be more expensive (Hansen, Miller, and Weber, 2017). When the police arrest the drug dealers, the production costs of the medicines increase because the drug is not as readily available as it was before. The organizations that deal with the sale of drugs are forced to raise the costs of buying them so that they can compensate the suppliers for the risks they face in the business (Halcoussis, Lowenberg, and Roof, 2017). The organizations also quickly shift their systems of production and distribution in response to shifts of enforcement that lead to the consumers spending a lot of money to get expensive illegal drugs.

The early suppliers of the fuel-efficient cars charged premium prices because there were fewer suppliers at the time, which meant that competition was low (Bhandari, 2018). There was a monopoly of suppliers for fuel-efficient cars, which made it possible for them to charge premium prices. However, the monopoly was eradicated when other suppliers adopted similar technologies. The law of supply led to the fading of the ability to charge high rates whereas other suppliers took such technologies, supply increased in the market more than the demand for the cars (Sarpatwari, DiBello, Zakarian, Najafzadeh, and Kesselheim, 2019). When supply is more than demand, prices decrease as the buyers have several options to choose from and select the cheapest sellers.

References

Bhandari, N. (2018). Hike in prices of petrol and its impact on demand and supply. International Journal for Advance Research and Development, 3(8), 33-37. Retrieved from https://www.ijarnd.com/manuscripts/v3i8/V3I8-1149.pdf

Halcoussis, D., Lowenberg, A. D., & Roof, Z. (2017). Estimating the Price elasticity of demand for Cannabis: a geographical and crowdsourced approach. Revista de Metodos cuantitativos para la Economia y la Empresa, 23, 119-136. Retrieved from https://www.econstor.eu/bitstream/10419/195415/1/894786466.pdf

Hansen, B., Miller, K., & Weber, C. (2017). The Legal Market for Marijuana: Evidence on Tax Incidence, and the Elasticity of Demand from Washington State. Working Paper. Retrieved from https://pdfs.semanticscholar.org/95d8/2fe710cf2a4db0535de7bf276dff53fe94e5.pdf

Sarpatwari, A., DiBello, J., Zakarian, M., Najafzadeh, M., & Kesselheim, A. S. (2019). Competition and price among brand-name drugs in the same class: A systematic review of the evidence. PLoS medicine, 16(7). Retrieved from, https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6667132/pdf/pmed.1002872.pdf