(A) Methamphetamine is a highly addictive drug, hence there is a high necessity associated with it, which would mean that for users of the drug, demand would be inelastic. P is a reputed necessity, because it is a good which isn’t essential for survival, but many users simply think they have to have it. Because those who use P generally have a strong addiction and dependence to P, an increase in price, caused by reduced supply from increased seizures of precursors used in the manufacture of the drug, such as pseudoephedrine, would most likely result in a less than proportional change in quantity demanded. Despite this, not all users of P are completely addicted, and a price increase would cause some users to reduce quantity demanded. It is for this reason that there is some slope to the demand curve, meaning P the price elasticity demand for P is perfectly inelastic.
(B) In contrast to the price inelasticity demand for consumers of P, producers of the drug would face an elastic supply curve. This is because producers of P would become more willing to increase quantity supplied as the price of P increases, in order to take advantage of greater monetary returns from the sale of their goods. However, because the majority of P producers are operating in the short run, their price elasticity isn’t as high as it could be, due to the supply of raw materials being fixed, and hence limited in quantity.
(C) The decrease in the quantity of raw materials available used to produce P has caused a decrease in the quantity supplied of P, because less can be produced than previous (due to the shortage of pseudoephedrine). This resulting scarcity of P has caused P producers to increase the price of P. the equilibrium price has increased signif...
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...es are price makers, if it were to be legalized, this activity would most likely resume, as consumers would prefer access to the product without price or quantity regulations.
The only way for the government to control the use of P is to attempt to contain the quantity being supplied, as well as reducing the quantity demanded. In my opinion, the best two tactics officials can use to attempt to control the quantities demanded and supplied are:
• Persist with current supply-side policies, in an effort to greatly reduce the quantity of P being supplied in NZ.
• Implement further drug education programmes, in an effort to reduce the willingness of consumers to consume P.
Diagram 5 shows the impact of supply and demand side methods to control P, the equilibrium quantity is greatly reduced. Compare this with diagram 4, where a tax only has limited effect on quantity.
Regrettably, the demand for drugs is considered to be relatively inelastic (at least in the short term). As a result, an increase in prices, generally speaking, may not lead to a substantial decrease in the quantity of drugs demanded. In essence, addicts will buy no matter the price. Factors that affect demand may include income level, the time frame (i.e. spring break or New Year’s Eve), and the availability of other substitute goods.
3Walker, Hugh: Market Power and Price levels in the Ethical Drug Industry; Indiana University Press, 1971, P 25.
The figure 4 shows the demand curve for a good with numerous close alternatives in consumption such as soft drinks or colas. To calculate the price elasticity of demand, first analyze the result when the price of a six-pack of sodas moves from $2 to $2.20, a 10% increase in price. However, the quantity demanded falls from 1,000 to 850, a 15% decrease in the quantity demanded. The price elasticity of demand of 1.5 measured here ensures that for every 1% change in the price of cola, quantity demand changes by 1.5% and it is clearly a relatively elastic
Price elasticity of demand can be calculated by the percentage change in the quantity demanded divided by the percentage change in price. The larger number for price elasticity of demand means the quantity demanded is more responsive to the price (Colander, 2013). This information tells us how a quantity responds to a change in the price. In the scenario, we can see that by incrementing the price, the quantity demanded changes
"Reducing Demand for Drugs." UN General Assembly Special Session on the World Drug Problem. May 1998. Web. 02 Mar. 2011. .
Diagram 1 shows the effect of the price floor on vodka in England and Wales. Before a price control was enforced by the government, the equilibrium price was Pe while the equilibrium quantity was Qe. Since the demand for vodka is price inelastic, the demand curve has a very high negative slope. The price floor must be set above the equilibrium price in order to reduce the quantity bought by consumers. The new minimum price for a standard bottle of 40% vodka is £10.16 (Pf). Qd is the quantity consumers are able and willing to buy at the minimum price. However, Qs is the quantity that the vodka firms are willing and able to supply. This results in a surplus, which is an excess of supply. The surplus is equal to Qs-Qd. In the end, Qd number of vodka bottles will be bought each at a price of £10.16. The fact that vodka’s demand is price inelastic means that Qd is not significantly lower than Qe. If vodka had a price elastic demand (much flatter demand curve) and also had a minimum price of £10.16, Qd ...
The law of demand states, as the price of a good or service increases, buyer’s demand for the good or services will decrease. Conversely, as the price of a good or service decreases, the buyer’s demand for this good or service will increase. Keep in mind, that all other factors must remain equal, which means there is no change in buyer tastes, in income or prices of similar goods. For example, pants go on sale at Kohl’s; you might by three instead of one. The quantity that I demanded increases because the price has
The prohibitionist national policy towards drugs in U.S has been extremely contentious in the present times. After decades of the stance that costs billions how many each year, the paltry achievements and the countless negative externalities have led to a clamor for alternative policies instead of a “War on Drugs”.
The price of a good is the most influential factor consumer’s take into consideration. If the prices of some goods go down, this means that there is more money in a budget to be spent on other goods. However, if prices of goods rise there is less to spend on other goods. It is by this reasoning that the prices of other unrelated goods will have an effect upon the demand for any product.
A change in quantity supplied is just a movement from one point to another in the supply curve. In opposite, the cause of a change in supply is a change in one the determinants of supply that shifts the curve either to the left or the right. These determinants are the resource prices, technology, taxes and subsidies, producer expectations, and number of sellers. An equilibrium price is required to produce an equilibrium quantity and a price below that amount is referred as quantity supplied of zero no firms that are entering that particular business. If the coefficient of price is greater than zero, as the price of the output goes up, firms wants to produce more of that output. As the price of the output goes up it becomes more appealing for the firms to shift resources into the production of that output. Therefore, the slope of a supply curve is the change in price divided by the change in quantity. The constant in this equation is something less (negative number always) than zero because it requires strictly a positive...
The quantity of Flu vaccine demanded in the U.S. was greater than the original supply let alone the reduced supply. The market price for the vaccine was between eight and nine dollars prior to the October announcement by Chiron, that it’s vaccine was contaminated, and soon afterwards doubled in price (Flaherty A02). By the eighth of October the vaccine was being offered to pharmacies at prices approaching ninety dollars per-dose a tenfold increase over the original price (Flaherty A02). The demand for the Flu vaccine is shown to be inelastic (the quantity demanded before the discovery of contamination was the entire supply (X) and after the announcement was the remaining quantity (X/2), while the price jumped from nine to ninety dollars { or Ed = .41}).
In the first case, the demand curve moves right as the demand increase when supply curve is stay same. It maybe happens when income increase, people have ability to consumer some products and services which are not necessities. At this price, consumers want to buy more products, but suppliers just want to sale the quantity of products as before, the excess led to upward pressure on the price. It led to the rise of equilibrium price and
However local governments both here in the US and abroad are either banning or “heavily restricted the sale of the products” stating they “are threatening
Now in the case of dairy farmers, the government aims at helping them by setting up a price floor (legal minimum price). Thus the price floor will be set above the equilibrium. Now due to the increase in price, quantity supplied at that point is greater than quantity demanded which results in a surplus of milk in the market. There are two possible outcomes for this
The scale to which a supply or demand curve reacts to an alteration in the price is the elasticity curve, which may be different between products, as some goods are more essential to people than others. When the product is a necessity, it is considered more likely to have its price changed, as people would continue buying it despite price increases. However, when the good or service is not considered necessary, a price increase will discourage people to buy it, as the opportunity cost will become too high.