Lecture 7 - 9/27/2009 Announcements Reading for today text...

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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 th ± text Chapter 5 pp. 116-127 (112-120 5 edition) 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 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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This note was uploaded on 03/21/2010 for the course ECON 101 taught by Professor Gerson during the Fall '08 term at University of Michigan.

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Lecture 7 - 9/27/2009 Announcements Reading for today text...

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