ECON
Slide Set 4 Ch 02 Crime and Drugs.pptx

# Slide Set 4 Ch 02 Crime and Drugs.pptx - Chapter 2 Crime...

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Crime and Drugs 1 Chapter 2

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Chapter 2 Appendix: Elasticity Elasticity of demand Responsiveness of consumers (buying decisions) To changes in the price of the product Elastic demand Buyers – more responsive to changes in price Inelastic demand Buyers – less responsive to changes in price
Elasticity Elasticity coefficient

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Elasticity If demand is elastic Elasticity coefficient > 1 (absolute value) Any percentage change in price causes a larger percentage change in quantity demanded If demand is inelastic Elasticity coefficient < 1 (absolute value) Any percentage change in price causes a smaller percentage change in quantity demanded
Elasticity Perfectly elastic demand The price doesn’t vary but the quantity demanded varies infinitely Demand – horizontal line Elasticity coefficient = infinity Perfectly inelastic demand No response to a change in price Demand – vertical line Elasticity coefficient = zero

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Figure 2-6: The extremes of elasticity
Elasticity Demand curves The flatter (closer to horizontal) curve will be more elastic The steeper (closer to vertical) curve will be more inelastic

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Figure 2-7: Two demand curves of varying elasticity D 1 is less elastic than demand curve D 2 at prices near their \$4 intersection
Elasticity Excise tax – supply decrease Less physically addicting drug Elastic demand Greater decrease in quantity Smaller increase in price Greater burden of the tax falls upon the supplier Lower profits

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Elasticity Excise tax – supply decrease More physically addicting drug Inelastic demand Very little decrease in quantity Bigger increase in price - by almost the full amount of the tax Greater burden of the tax falls upon the consumer Higher price of the drug
Figure 2-8: Two demand curves of varying elasticity with the imposition of an excise tax

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Chapter 2: Crime and Drugs Crime Any action that is forbidden by law and carries criminal penalties Violent crimes: murder, rape, robbery, and assault Offenses against property: arson and thef Other crimes: gambling, prostitution, possession of and trafficking in drugs, and sales of pornography
Crime and Drugs Crime costs: Damage to property and to people Policies undertaken by government to prevent and punish criminal activity Administering the criminal justice system Police, courts, and prisons Violent crime rates Have fallen since 1990

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Table 2-1: Violent crime rates in United States (number of crimes per 100,000 inhabitants), selected years 1990–2011 a Violent crime includes murder and nonnegligent manslaughter, forcible rape, robbery, and aggravated assault; and by definition it involves force or threat of force
Crime Prevention Crime prevention is an example of a public good Public goods and services Characteristics Indivisible Nonrivalrous Nonexcludable Subject to the free-rider problem Ofen provided by the government Examples: national defense, street lights, roads, crime prevention

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• Spring '11
• Diemer

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