The main reason for rise in the price of cocaine is decreasing in supply, because we have scare recourses. Cocaine was founded a long time ago and since that moment people have produced a really big amount of this drug. So now the producers have less recourses to make cocaine, so supply for cocaine will decrease and prices will increase. But demand will not change, because it is inelastic (because it is drug and people, who are taking drugs, will always buy it ).
No substitutes?
ReplyDeleteYes, there are a lot of kinds of drugs( substitutes), but some people can only take cocaine
ReplyDeleteSo, no increase in demand?
ReplyDeleteAlso "The main reason for rise in the price of cocaine is decreasing in supply, because we have scare recourses"
We have scarce resources which would affect the elasticity of supply, yes, but not a shift.
Why not?? Less resources to produce - less production - less supply, or I'm wrong?
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ReplyDeleteSupply will decrease in case of government policy against drugs
ReplyDeleteMost - maybe all - resources are scarce. Government action would shift supply, probably halt it completely IF successful
ReplyDeleteWell done in attempting the homework - the signs of an excellent student include the willingness to attempt unusual topics.
ReplyDeletePlease 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!