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Question: There is ongoing policy debate concerns whether to legalize the use of drugs, such as marijuana. Some researchers estimate that legalizing marijuana would cause its price to fall by as much as 95 percent. Proponents of legalization argue that legalizing drug would lower crime rates by eliminating the main reason for the murderous gang was that plague many big cities and by reducing the incentive for drug addicts to commit robberies and burglaries. Opponents of legalization argue that lower drug prices would lead more people to use drugs.

a. Suppose the price elasticity of demand for marijuana is -2. If legalization causes the price of marijuana to fall by 95 percent, what will be the percentage increase in the quantity of marijuana demanded?

b. If the price elasticity is -0.02, what will be the percentage increase in the quantity demanded?

c. Discuss how the size of the price elasticity of demand for marijuana is relevant to the debate over its legalization.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M93118211

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