1. The price-elasticity of demand for cocaine to be 0.3 (Ped =0.3). Is this price-elastic or...

1. The price-elasticity of demand for cocaine to be 0.3 (Ped =0.3). Is this price-elastic or price-inelastic? And Why?

2. The price-elasticity of demand for methamphetamine to be 1.5 (Ped = 1.5). Is this price-elastic or price-inelastic? And Why?

Expert Solution

Q1) Since the price elasticity of demand is less than 1, the demand for cocaine is price inelastic. This is because people who use cocaine are addicted to it. It does not matter fi the price increase for them as they can not reduce the consumption of cocaine once they get addicted.

Q2) Since the price elasticity of demand is greater than 1, the demand for methamphetamine is price inelastic. This si because meth is a much stronger drug than cocaine and people do it occasionally. Thus,any increase in price can greatly reduce the demand as people are less addcited to it and can switch to other drugs.

Rahul Sunny answered 2 years ago

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