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Lecture 7 - Announcements Reading for today text Chapter 4...

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9/27/2009 1 Announcements Reading for today text Chapter 4 pp. 103-110, Chapter 14 pp. 394-396 (99-104, 370-372 5 th edition) Reading for Monday t t Ch t 5 116 127 (112 120 5 diti ) text Chapter 5 pp. 116-127 (112-120 5 th edition) Social Cost of Drug Wars increase in enforcement decreases supply increase in production costs exit from industry Price ($ per unit) d d f ill l d tells effect of supply shift comparison of costs and benefits cost due to penalties on supplier Quantity S demand for illegal drugs believed to be price inelastic D supply shift leads to increase in expenditure on drugs demand shift leads to lower expenditure on drugs Δ P Social Cost of Drug Wars increase in enforcement decreases supply increase in production costs exit from industry Price ($ per unit) tells effect of supply shift comparison of costs and benefits cost due to penalties on supplier Quantity demand for illegal drugs believed to be price inelastic supply shift leads to increase in expenditure on drugs demand shift leads to lower expenditure on drugs S D Costs and Benefits of the War on Drugs Miller, Benjamin, and North: In the early 1990’s… Federal government spent $2 billion per year to stop the importation of cocaine from Columbia Efforts raised the price of cocaine by 4% compared with what it would have been without those efforts Every additional 2% increase in price of cocaine would take an additional $1 billion per year More recent estimates: drug war costs U.S. $100 billion per year Costs and Benefits of the War on Drugs National Household Survey on Drug Abuse 3.7 million Americans used cocaine in 1999 1.5 million regular users
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