Question

The government of the city of Dayton, Ohio in the U.S.A. wants to fight crime related to illegal drug use. Users often turn to crime to finance their drug habit. The city government asks you as an economic consultant to compare two policy interventions. Interdiction, which is aimed at disrupting delivery of drugs, and education, which aims at informing users about the danger of illicit drug use. Assume that the total value of drug related crime equals the total expenditure on drugs. Which policy do you recommend to Dayton’s policymakers, if you assume that demand for illegal drugs is inelastic due to addiction? Justify your answer rigorously. Illustrate your answer graphically.

Answer 1

Two policies available: disrupting delivery of drugs and educating consumers about the ill-effects of drug consumption.

Assumption: demand is inelastic due to addiction

Based on the information provided, i would suggest educating consumers about the ill-effects of drugs. It is given that when consumers are not able to finance their drug requirements, they indulge in crimes. So, after analyzing this situation, educating consumers is the best policy. Education will help consumers to understand the dangerous effects of drugs on the health and gradually after becoming aware, they will reduce the consumption. When consumer will decide on their own, that they do not want drugs anymore, they will not indulge in crimes. Because it is given that the demand of drugs is inelastic, so, educating consumer and making them demand less drugs is the only solution to the problem.

Whereas, if government disrupt the supply of drugs, people will become angry and may indulge in crimes.

This can be graphically represented as :