The U.S. government's focus on supply reduction efforts in its "war on drugs" has been relatively unsuccessful at addressing illegal drug use. Some economists believe that a successful anti-drug program must concentrate on reducing demand; for example, through drug education and voluntary treatment programs for addicts.Suppose the price elasticity of demand for cocaine is -0.5. What will happen to the equilibrium price, quantity, and total revenue from cocaine sales if the government succeeds in its efforts to reduce demand? What is likely to happen to the incentive to sell cocaine?Suppose the government continues to concentrate its efforts on supply reduction and is able to reduce the supply of cocaine. As a result of the reduction in supply the price of cocaine increases by 25 percent. If the price elasticity of demand is -0.5, what is likely to happen to the incentive to sell cocaine?Based on your answers, explain why one approach might be preferred over the other.

1. Answer: It has been provided that government succeeds in its efforts to reduce demand . Given the…

Answered: The U.S. government's focus on supply…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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The U.S. government's focus on supply reduction efforts in its "war on drugs" has been relatively unsuccessful at addressing illegal drug use. Some economists believe that a successful anti-drug program must concentrate on reducing demand; for example, through drug education and voluntary treatment programs for addicts.

Suppose the price elasticity of demand for cocaine is -0.5. What will happen to the equilibrium price, quantity, and total revenue from cocaine sales if the government succeeds in its efforts to reduce demand? What is likely to happen to the incentive to sell cocaine?
Suppose the government continues to concentrate its efforts on supply reduction and is able to reduce the supply of cocaine. As a result of the reduction in supply the price of cocaine increases by 25 percent. If the price elasticity of demand is -0.5, what is likely to happen to the incentive to sell cocaine?
Based on your answers, explain why one approach might be preferred over the other.

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