Economics Case Study: Drug Interdiction Impact and Policy Analysis

This case study delves into the economics of drug interdiction, analyzing the effectiveness of supply-side policies in reducing drug-related crime. It highlights the inelastic nature of drug demand, arguing that simply reducing supply may increase prices and potentially boost the revenue of drug dealers, thus exacerbating crime. The study contrasts this with demand-side policies, such as drug education, which can shift the demand curve, leading to reduced equilibrium quantity, price, and overall revenue for drug dealers, ultimately decreasing drug-related crime. The paper uses economic principles to evaluate the impact of government interventions in the illegal drug market, emphasizing the importance of understanding both supply and demand dynamics when formulating effective drug control strategies. The analysis includes references to monetary and fiscal policies and their impact on aggregate demand, ultimately supporting the argument for demand-side solutions like drug education as a more effective approach to reducing drug-related crime.

Running head: ECONOMICS
Economics
Name of the university
Author note

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

ECONOMICS
multiplication of price and quantity, increase in price will help the drug dealers to earn more
money. Therefore, trying to reduce the supply of drugs will not help in reducing the drug related
crimes. The reason is that reducing supply will increase the price of drugs which will also
increase the drug related crimes (Guerzoni & Raiteri, 2015). Therefore, the alternative approach
is drug education. The successful drug education will help in shifting the demand curve to the
left and for that there will be decline in the equilibrium quantity and equilibrium price. As the
demand will be decreasing, the total revenue will also decline which will be decreasing the drug
related crimes.

ECONOMICS
Reference list
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policies on energy consumption and CO2 emissions from urban passenger transportation:
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Hertwich, E. G. (2018). Towards demand-side solutions for mitigating climate
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Guerzoni, M., & Raiteri, E. (2015). Demand-side vs. supply-side technology policies: Hidden
treatment and new empirical evidence on the policy mix. Research Policy, 44(3), 726-
747.
Rémuzat, C., Kapuśniak, A., Caban, A., Ionescu, D., Radière, G., Mendoza, C., & Toumi, M.
(2017). Supply-side and demand-side policies for biosimilars: an overview in 10
European member states. Journal of market access & health policy, 5(1), 1307315.