Question

PART III:   DEMAND AND SUPPLY ANALYTICAL

The recently elected federal government has promised to decriminalize marijuana. Construct a supply and demand diagram to analyze the effects of decriminalization. More specifically, how will the demand for marijuana be affected? What will happen to the supply of marijuana?   How will the equilibrium price and quantity be affected in relation to the equilibrium P and Q before decriminalization? Assume marijuana will be sold and marketed in the same manner as cigarettes and alcoholic beverages. (Graph paper not required, but must be neat.)   

Make as per Canadian Standards. Thanks. No Plagiarism.

Answer 1

In the given figure we can see the Demand and Supply curve D and S respectively of Marijuana before legalisation. As Marijuana is legalised, the supply increases as not producers can produce the drug without it being deemed as in illegal activity and make legal profits through the sale of Marijuana, therefore Supple curve shifts rightward from S to S'.

Similarly, as the drug is legalised fear of purchasing it reduces and people can buy it more openly without the fear of it being an illegal commodity. Therefore the demand curve will also shift rightward from D to D' and the following changes will be seen (as shown in the diagram)

Result: eq price remians the same, eq qty increases