Question

1. Draw two separate demand and supply diagrams to represent the beer market – one for Canada and one for Colorado. Be sure to label your graph properly (title, axes, curves, equilibrium, etc.) – your graph should be stand-alone which means a reader can easily interpret your graph. Show how the legalization of marijuana in each location has impacted the market for beer. Make sure you clearly indicate which curve shifts and compare the old equilibrium to the new one.*

So for Canada, marijuana has decreased beers sales and for Colorado marijuana has complimented beer and has increased its sales. The instructions are above. Thank you!

Answer 1

(i)

It is given that in the Canada,the legalisation of marijuna has decreased the sales of beers, so the demand curve of beers would decline and the demand curve would shift towards the left leading to the decline in the equilibrium price and the quantity.
As we can see that in Canada before the legalization of Marjauna, the equilibrium quantity and price is Q and P respectively. After the legalization, the equilibrium quantity and price has decreased to Q' and P' respectively.

(ii)
The 2nd scenario represents the case in which the demand for a beer has increased in Colorado as marijuna has become the complementary good for beer.
In this case, the demand for beer would increase and the demand curve would shift towards the right leading to the increase in the equilibrium price and quantity.
Earlier, the equilibrium price and quantity was P and Q respectively. New equilibrium price and quantity is P' and Q' respectively.