Saturday 26 September 2009

Using supply and demand analysis, explain the reasons for a rise in the price of cocaine.

According to my opinion, the demand for cocaine is inelastic. Because of that the supply for cocaine have decreased.(people still buy it for high prices) I think various amount of people stopped smoking cocaine(because of the treatment), and most of the people still don't smoke it. Most of the young adults, who are addicted to cocaine still buy it, but they are few other people buying it. The treatment for heavy cocaine users have reduced the consumption of cocaine. Because of those reasons, according to my opinion the production of cocaine have decreased in amount. The demand for cocaine is more, but supply contracts,(less supply more people buy it(prices will go up), because it's inelastic, but also because of the treatment the amount for the heavy cocaine users have decreased. This is my opinion, i don't know whether it's true or not. I think this is the cause, which makes the price of cocaine to mount.

here is the graph
:

Adding up: throughout the years the price for cocaine is becoming more cheaper.. last 2.5 decades, price for cocaine was much more expensive then this year. According to exchange rates, cocaine sellers are making less profit then they have used to, because the increase in euro and decrease in dollar gives less profit to the cocaine sellers who are selling the cocaine to America. Now it's much more profitable to take the cocaine out of the USA and to sell it to other countries. Also the price of marijuana effects the demand for cocaine. The Prices of marijuana and cocaine are negatively related, if the price for cocaine is high, marijuana maybe a substitute for some people.

7 comments:

  1. This comment has been removed by the author.

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  2. Marijuana is not addictive, demand for marijuana's price is elastic, cocaine causes addiction, so the demand for it's price is inelastic.

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  3. I'am not sure. i have deleted the previuous post because of this... I think Marijuana can't be a substitude, because, people who are addicted to cocaine can't stop smoking it.

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  4. Well done in attempting the homework - the signs of an excellent student include the willingness to attempt unusual topics.

    Please thoroughly read this:

    http://economics.about.com/b/2009/07/22/cocaine-prices-the-war-on-drugs-and-economics.htm

    follow the links and then add necessary information to your post - thus helping create a perfect blog!

    ReplyDelete