Demand side policies in Economics

Running head: ECONOMICS
Economics
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ECONOMICS
Demand side policies
The demand side policies are the attempts to either increase or decrease the demand in
order to affect employment and output. In this particular case, the demand side policies will be
used for decreasing the aggregate demand of drugs. The demand side policies are known to be
classified into monetary policy and the fiscal policy (Batur, Bayram & Koc 2019). Therefore, it
can be said that the demand side policies are used for changing the aggregate demand in the
economy which is comprised of consumer spending, investment, net exports and government
spending. Therefore, anything which will affect these factors will be affecting demand. The
demand side policies also can be either contractionary or expansionary.
In this case, the government in order to reduce the demand for drugs tries to implement demand
side policies. The reason behind this is that, drug is known to have several adverse effects since
dependence on drugs can ruin the lives of the drug users as well as their families. Drug addicts
can often lead to robbery and lead to other violent crimes. When the government stop some
drugs from entering the country and then arrests the smugglers, it will be increasing the cost of
selling drugs. This will then reduce the quantity of drugs supplied at any given price. However, it
must be kept in mind that the demand for drug is inelastic in nature. This means that that people
will be buying the same amount of drugs whether the price drops or rises. Therefore, even if the
government increases the price of drugs, during the short run, the demand will not decline, since
drug is an inelastic good (Guerzoni & Raiteri, 2015). When the government is known to stop
drugs from entering the country and then arrests the smugglers, it will be increasing the cost of
selling drugs. The demand for although remains the same. However, the supply curve moves to
left leading to increase in the price of equilibrium price. Since, drug is an inelastic good, a rise in
three equilibrium price will increase the revenue of drug dealers. Since revenue is the