ECON 120
Friday, November 22, 2019
Lecture Notes
If a good is illegal, the
supply curve shifts UP and the marginal cost INCREASES.
If a good is illegal, the
demand curve shifts DOWN and the quantity will DECREASE.
Inefficiencies if the
commodity is ILLEGAL:
1. Total Surplus FALLS,
Quantity FALLS
2. Quality of Good FALLS
3. Violence
One of the most effective
ways to increase crime is to declare an addictive commodity ILLEGAL.
An addictive commodity is
very inelastic.
To punish demanders of an
addictive commodity:
Work on reducing demand by
1. Propaganda “Just Say
No”
2. Punish customers
(Demand shifts down, Price falls, Quantity falls, Crime falls)
3. Make everything legal.