Microeconomics Reflection: Canadian Cannabis Supply Shortage Analysis

This report is a microeconomic reflection on the cannabis shortage in Canada. The student analyzes a current affairs news article discussing the supply shortages of cannabis following legalization. The report applies microeconomic principles, particularly supply and demand, to explain the shortage and its implications. The student references the news article and academic resources to support their analysis, examining the relationship between the legalization of cannabis, increased demand, and the resulting supply shortages, and suggests a potential solution of increasing prices to reach a new equilibrium. The report demonstrates an understanding of microeconomic concepts and the ability to apply them to real-world scenarios, providing a concise analysis of the economic factors at play.

Running head: MICROECONOMICS
Microeconomics
Name of the student
Name of the university
Author note

Shortages
Q Quantity
D
D1
S
MICROECONOMICS
Supply shortage of cannabis in Canada
Most of the Canadian provinces have reported that they are experiencing supply
shortages of cannabis since the licensed producers of cannabis in Canada have to struggle in
order to keep up with the high demand for commercial cannabis products. After the cannabis
have been legalized in Canada in October 2018, there had been a huge rise in demand of
cannabis. Unable to keep up with the demand, the government stores have been facing huge
amount of supply shortages and therefore have closed down many shops. Therefore, after the
legalization of cannabis in October 2018, there has been a rise in demand, supply shortages in
legal cannabis trade in Canada (High Demand and Short Supply in Canada’s Legal Cannabis
Trade., 20190. In Quebec, many stores of cannabis which are run by the government agency,
have to be shut down its twelve stores for several days.
Figure 1 Supply shortages of cannabis in Canada
(Source: Bade & Parkin, 2015).
Price

MICROECONOMICS
The news article provided above states cannabis have been facing supply shortages
after the legalization of cannabis. The article provides an economic theory of demand and
supply which we have studied in microeconomics. The above article relates to the
microeconomic theory which we have studied. After the legalization of cannabis, there has
been an excess demand which lead to supply shortage. Many government shops of cannabis
are kept closed due to supply shortage. In order to keep up with the high demand, I think the
government should be increasing the price of the cannabis. The new price will also be
increasing the level of equilibrium in the cannabis market (Bade & Parkin, 2015).

MICROECONOMICS
Reference list
Bade, R., & Parkin, M. (2015). Foundations of microeconomics. Pearson.
High Demand and Short Supply in Canada’s Legal Cannabis Trade. (2019). Retrieved from
https://www.nytimes.com/2018/11/02/world/canada/legal-marijuana-shortages-
canada-letter.html