Question

Q8. Lawmakers believe that the social problem associated with doing crack is that users must

obtain relatively large sums of money daily and all of the money spent on crack is obtained

illegally through criminal activities. They decide to combat this crime by increasing efforts to

convict dealers, thereby restricting the supply of crack available.

Analyze this policy assuming that the demand for crack over the relevant range is price

inelastic.

Answer 1

We must understand why is crack so famous in the first place. It gives that instant high as it is cooked by purifying cocaine. But in my view, this policy can backfire. How?

When you increasingly convict the dealers, yes the suppply is reduced but not null. The few suppliers left take this to their advantage and exercise strong bargaining power of suppliers. As we know, the demand is price inelastic, no matter how much ever the supplier quotes the price for, the people are gonna buy it anyways. Thereby no subtle decrease in demand for crack which was supposed to be the goal of the policy. But this in turn pushes the buyer to perform more illegal activities in order to pay up for the hiked price of the crack. Hence, the illegal activities committed increase after the policy is enacted. All these reasons make us conclude that this policy can counterattack the lawmakers' very own idea of curbing illegal activities.

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