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Discussing the Superbowl experience and exploring the impact of drug confiscations and education on supply and demand curves in economics.
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Did you watch the Superbowl? • Yes, the whole thing. • Part of it. • No
If the police confiscate drugs and resell them at market price, with no other punishment for sellers or buyers, the outcome is the same as if they didn’t confiscate at all. • True • False
Why is that? • The confiscations push the supply curve upwards. This results in a higher equilibrium price and lower consumption. • If you don’t see how this works, think about the comparison between sessions 2 and 3 of our experiment.
A credible education program about negative health effects of a drug would • Shift the supply curve up. • Shift the demand curve up. • Shift the demand curve down. • Shift the supply curve down.
Why is that? • Increased penalties shift the supply curve up. Equilibrium moves to a new point on the demand curve with higher price and quantity. If demand is inelastic, then percentage reduction is quantity is smaller than percentage increase in price. Expenditures =Price x Quantity increases.
If the demand for heroin is inelastic, increased penalties for heroin would cause total expenditures on heroin to • Rise • Fall • It could rise or fall depending on whether the supply curve is inelastic or elastic.
