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Economics of Legalization of marijuana

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1. Please explain. What do you think will occur to the price of marijuana if its purchase and sale are legalized? Be specific as to changes in the supply and demand curves.
Personal opinion welcome.

2. Please explain How can we use the price elasticity of demand to predict the effects of public policies?
Please give two examples.
Personal opinion welcome.

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Solution Summary

Price elasticity and how legalization of drugs affects supply and demand

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Marijuana legalization would affect both supply and demand. Many farmers who currently grow legal crops would likely switch to marijuana because it is more lucrative. At the same time, many people who currently don't use marijuana would want to try it if it were legal. Thus both the supply and demand curves would shift outward. The price could either increase, decrease or stay the same depending on the magnitude of these shifts. If supply shifts more than demand, then the price will fall. If ...

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