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Principles of Economics- Mankiw (5th) 108

Principles of Economics- Mankiw (5th) 108 - 112 PA R T T W...

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112 PART TWO SUPPLY AND DEMAND I: HOW MARKETS WORK never returned to the peak reached in 1981. The cartel now seems to understand that raising prices is easier in the short run than in the long run. DOES DRUG INTERDICTION INCREASE OR DECREASE DRUG-RELATED CRIME? A persistent problem facing our society is the use of illegal drugs, such as heroin, cocaine, and crack. Drug use has several adverse effects. One is that drug depen- dency can ruin the lives of drug users and their families. Another is that drug addicts often turn to robbery and other violent crimes to obtain the money needed to support their habit. To discourage the use of illegal drugs, the U.S. govern- ment devotes billions of dollars each year to reduce the flow of drugs into the country. Let’s use the tools of supply and demand to examine this policy of drug interdiction. Suppose the government increases the number of federal agents devoted to the war on drugs. What happens in the market for illegal drugs? As is usual, we answer this question in three steps. First, we consider whether the supply curve or
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