Here is the assignment: As we emphasized in the beginning of this course, economics really consists of a set of tools that can be used to analyze problems. This assignment takes a look at a question that is confronting the U.S. as marijuana is becoming legalized in more states: we are looking at the potency effect why are drugs stronger than they used to be? Economics has tools to provide answers to this question. Click here (Links to an external site.) to watch a video on this subject.
Then answer the following questions in a document on your computer. You can enter your answer directly into the space provided (the preferred method) or you can attached a file using the following file formats: doc, docx, or txt.
1. Explain the Potency Effect.
2. Then explain which economic principles from Ch 1 are used in the video to answer the question of why illegal drugs are stronger today.
Then submit your document by uploading the file.
Link video: http://www.learnliberty.org/videos/whyareillegaldrugsstrongertheyusedbe/
Link ebook
ch1:
http://www.macmillanhighered.com/launchpad/krugmanwellsmicro4/2800690/Home#/ebook/item/MODULE_bsi__E5D9EEC9__E99B__4CED__8213__F353A8BFB99B/bsi__6328EEE4__CDB0__493A__8915__F6FCCA33AC8A?
mode=Preview&getChildrenGrades=True&includeDiscussion=False&readOnly=True&toc=ebookfilter&renderIn=fne
Sample
1. Explain the Potency Effect.
The Potency Effect refers to the phenomenon where illegal drugs become stronger or more potent over time. This occurs because, in an illegal market, suppliers have an incentive to increase the potency of their products to maximize profits while minimizing risks. Stronger drugs are more concentrated, making them easier to transport and conceal, which reduces the likelihood of detection by law enforcement. Additionally, consumers in illegal markets often prefer stronger drugs because they provide a more intense effect, and they are willing to pay a premium for higher potency. As a result, the market shifts toward increasingly potent drugs over time.
2. Explain which economic principles from Chapter 1 are used in the video to answer the question of why illegal drugs are stronger today.
The video uses several key economic principles from Chapter 1 to explain why illegal drugs are stronger today:
a. Incentives Matter
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Principle: Individuals and firms respond to incentives. In the case of illegal drugs, suppliers face strong incentives to maximize profits while minimizing the risk of getting caught. By producing more potent drugs, they can transport smaller quantities (which are easier to conceal) while still delivering a high-value product to consumers. This reduces their risk of detection and increases profitability.
b. Trade-offs and Opportunity Cost
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Principle: Every decision involves trade-offs. For drug suppliers, the trade-off is between producing larger quantities of less potent drugs (which are bulkier and riskier to transport) versus smaller quantities of highly potent drugs (which are easier to conceal and transport). The opportunity cost of producing less potent drugs is higher because it increases the risk of getting caught and reduces profit margins.
c. Markets and Efficiency
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Principle: Markets tend to move toward efficiency. In the illegal drug market, the most efficient way to maximize profits and minimize risks is to produce and sell highly potent drugs. This is because potency allows suppliers to deliver more value in a smaller package, reducing transportation costs and the likelihood of detection.
d. Supply and Demand
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Principle: The interaction of supply and demand determines market outcomes. On the demand side, consumers often prefer stronger drugs because they provide a more intense experience. On the supply side, producers are incentivized to meet this demand by increasing potency. Over time, this dynamic leads to a market dominated by stronger drugs.
e. The Role of Government and Regulation
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Principle: Government policies (such as drug prohibition) can create unintended consequences. By making drugs illegal, governments increase the risks and costs associated with drug production and distribution. This incentivizes suppliers to produce more potent drugs to offset these risks, leading to the Potency Effect.
Conclusion
The Potency Effect is a direct result of economic principles at work in an illegal market. Suppliers respond to incentives, make trade-offs, and adapt to the constraints of prohibition, leading to the production of increasingly potent drugs. Understanding these principles helps explain why illegal drugs today are stronger than they used to be.
