Question

The Prohibition of 1920-1933 failed largely because of elastic demand for alcohol. True, false or uncertain

(Please answer with strong economic reasoning. Answer must be atleast 200 words, if not I will downvote, since it's an essay question not a simple yes or no)

Answer 1

If the demand is elastic, then small changes in price, changes high amounts of quantity demanded. In this case, during the years 1920-1933, the prices of alcohol were increased and given that the demand is elastic where the increase in prices of alcohol can cause hue decrease in the quantity demanded in the alcohol by the buyers on the whole. If that is the case here, then the steps taken for the prohibition of alcohol might have been highly fruitful and there could be success in this regard. However given that the elasticity of demand is the reason for the failure which is actually not true in economic terms. There might be several other reasons which has got to influence the shift in the demand curve towards right (namely non price terms) which can get to become the reason for increase in demand and in turn resulting in failure of the process. Some of the reasons include, increase in the incomes, no availability og substitutes etc. On the whole, to conclude, the given statement that elastic demand of alcohol is the reason for the failure is totally 'false' where one has to identify some of the other economic as well as other factors on the whole.