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Full legalization of marijuana production, sale, and use within a competitive market framework.
Furthermore, whereas the impact of each of the proposed models may vary, it is expected that the proposed legislative changes will affect some common areas across each country. These include: 6. Fiscal measures 7. Law enforcement/Crime 8. Health Costs 9. Vehicle Accidents4 10. Marijuana use 2. Economic Theory of Marijuana Legalization The Market for Illegal Drugs In the market for illegal drugs (including Marijuana), the amount of the product supplied will depend on the market price of the product, prices of the factors of production and level of productivity, among other factors. On the demand side, this is influenced by the price that he/she is willing to pay for the products along with non-price factors which include taste and preferences. The amount that the supplier is willing to make available in the market is represented by the supply curve. Depending on the nature of the market, his curve may be close to horizontal (highly elastic), drawing on the assumption that producers can provide just about if not all that is demanded and that cost per unit does not increase with production levels. The flatness (slope) of the supply curve also speaks to the responsiveness (elasticity of supply) of the suppliers to changes in the price of the drug and indicates that small increases in the price will attract new supplies. The quantity that the buyer is willing to purchase is represented by a negative (downward) sloping demand curve. The slope of the demand curve demonstrates the negative relationship between the price of the product and the amount the buyer is willing to purchase so that an increase in price will lead to a decrease in the amount demanded. [4]. The extent of that decrease in quantity demanded is measured by the buyer’s price elasticity of demand or his/her responsiveness to price changes. Since marijuana, like most illegal drugs, tend to be habit forming, the slope of the demand curve is assumed relatively steep (relatively inelastic) This is explained by the existence of competing objectives between the supplier and the buyer, where the supplier aims to maximize profit, while the buyer seeks to maximize utility. Figure 1: Market for Illegal Marijuana.
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