Question

Using the concept of elasticity, explain a drug enforcement policy aimed at getting rid of suppliers of heroin that may not be very effective in reducing heroin consumption.

Answer 1

Price elasticity of demand is the responsiveness of quantity demanded of a product when its price changes. However, there are some goods which are highly inelastic, meaning that however much the price changes, their demand is unchanged. This is true in case of necessities (a sharp increase in the price of bread would only result in a small reduction in quantity demanded, making it relatively inelastic). The same is the case for addictive drugs because their demand is inelastic.

If the government aims at reducing the suppliers of heroine, it would imply that the demand for heroin would be much greater than the supply. This would result in a price rise of heroin. However, it would not result in a decline in heroin consumption because its demand is relatively inelastic. The consumers would be willing to pay a much higher price for the same amount of heroin and hence the policy would be largely ineffective.