Microeconomics
Microeconomics
11th Edition
ISBN: 9781260507041
Author: Colander, David
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 6, Problem 7IP

In 2004, (Congress allocated over $20 billion to tight illegal drugs About 60 percent of the funds was directed at reducing the supply of drugs through domestic law enforcement and interdiction. Some critics of this approach argue that supply-side approaches to reduce the drug supply actually help drug producers.

  1. a. Demonstrate graphically the effect of supply-side measures on the market for illegal drugs.
  2. b. Explain how these measures affect drug producers. (Hint Consider the elasticity of demand.)
  3. c. Demonstrate the effect of demand-side measures such as treatment and prevention on the market for illegal drugs.
  4. d. How does the shift in demand affect the profitability of producers?
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1. After the reopening of borders with mainland China following the COVID-19 lockdown, residents living near the border now have the option to shop for food on either side. In Hong Kong, the cost of food is at its listed price, while across the border in mainland China, the price is only half that of Hong Kong's. A recent report indicates a decline in food sales in Hong Kong post-reopening. ** Diagrams need not be to scale; Focus on accurately representing the relevant concepts and relationships rather than the exact proportions. (a) Using a diagram, explain why Hong Kong's food sales might have dropped after the border reopening. Assume that consumers are indifferent between purchasing food in Hong Kong or mainland China, and therefore, their indifference curves have a slope of one like below. Additionally, consider that there are no transport costs and the daily food budget for consumers is identical whether they shop in Hong Kong or mainland China. I 3. 14 (b) In response to the…
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