Need help with my microeconomics homework (screenshot
available). Which policy is the most successful to reduce drug related crime?
717,How we can summarise it?When demand is inelastic price effect is greater than the output effect and totalrevenue follows price. When demand is elastic output effect is greater than theprice effect and total revenue follows outputIn case of demand which is unit elastic the percentage change in price is equal to thepercentage change in quantity demanded, so there is no change to TR (regardlesswhether the price increases or decreases) and TR is maximised.The tools of supply and demand can be applied in many different kinds of markets. Such asthe market for wheat, the market for oil and the market for illegal drugs.7.17, For example do drug bans increase or decrease drug-related crime?Assume that the Australian government increases the number of customsinspectors and police officers devoted to preventing drug imports. What happens?The higher number of customs inspectors will decrease the supply of drugs which raises theprice and leads to a reduction in quantity sold. If demand is inelastic, total expenditure ondrugs (same as total revenue for seller of drugs) will increase. If demand is elastic, totalexpenditure on drugs by drugs users will fall.Instead of increasing the number of customs inspectors assume that the governmentpursued a policy of drug education. What happens? The demand for drugsdecreases(demand curve shifts left) which lowers price and quantity sold. Total expendituremust fall (since both price and quantity fall).Which policy in your opinion be more successful in reducing drugrelated crime. Use the theory of elasticity in your posting.
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