Answer to Question #312668 in Microeconomics for Chanthou

Question

A)  In 2004, US Congress allocated over USD20 billion to fight illegal drugs. About 60 percent of the funds was directed at reducing supply of drugs through domestic law enforcement and interdiction. Some critics of this approach argue that supply-side approaches to reduce drug actually help drug producers.

 

a.     Demonstrate graphically the effect of supply-side measures on the market for illegal drugs.

 

 

Demonstrate the effect of both supply-side (law enforcement and interdiction) and demand-side measures (treatment and prevention on the market for illegal drugs). How do they affect the profitability of producers? 

Answer 1

The supply side management