Transcript Did you watch the Superbowl?

Did you watch the Superbowl?
1. Yes, the whole
thing.
2. Part of it.
3. No
40%
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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.
52%
1. True
2. False
48%
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
1. Shift the supply curve
up.
2. Shift the demand curve
up.
3. Shift the demand curve
down.
4. Shift the supply curve
down.
93%
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3% 3%
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
1. Rise
2. Fall
3. It could rise or fall
depending on
whether the supply
curve is inelastic or
elastic.
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And on to our lecture…