A persistent problem facing our society is the use of illegal drugs, such as heroin, cocaine and crack. Drug use has several adverse effects. One is that drug dependency can ruin the lives of drug users and their families. Another is that drug addicts often turn to robbery and other violent crimes to obtain the money needed to support their habit. To discourage the use of illegal drugs, many governments devote billions of dollars each year to reduce the flow of drugs into their countries. Suppose the Australian government increases the number of customs inspectors and police officers devoted to preventing imports of drugs. (20 marks)
- Using the concepts of demand supply and elasticity examine this policy of drug prohibition. What happens in the market for illegal drugs? Use appropriate graph/s to answer your question.
- Do drug bans increase or decrease drug-related crime? Explain. Use economic theories and empirical findings to support your arguments.
(Hints: First, you can consider whether the supply or demand curve shifts; Second, the direction of the shift; Third, how the shift affects the equilibrium price and quantity).
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