The task: “Using supply and demand analysis, explain the reasons for a rise in the price of cocaine.”
In may of this year, the BBC covered a story on the decline in the market for the hard-drug cocaine. The Serious Organised Crime Agency claimed that the international cocaine market was “in retreat” as a result of a year of successful operations around the world. The price per kilo has risen from £39,000 in 2008 to £45,000 in 2009.
Those increases in price are a result of a huge decrease in supply. The supply has decreased as a result of intensive police and narcotic brigades against the traffic and selling of drugs. The intensity of their operations has caused a lower supply of cocaine.
A simply supply-demand curve can show us what happened in figure:
As shown, a decrease in supply causes a increase in price if everything else remains the same (ceteris paribus – remember?). So the increasing of anti-cocaine actions are the explanation for the rising prices of cocaine, as the supply decreases.
References:
http://articles.latimes.com/2007/nov/09/world/fg-drugs9
http://news.bbc.co.uk/1/hi/uk/8044275.stm
http://kristianseconomics.blogspot.com/ (for supply-demand curve, nice graph Kristian!)
Well done in attempting the homework - the signs of an excellent student include the willingness to attempt unusual topics.
ReplyDeletePlease thoroughly read this:
http://economics.about.com/b/2009/07/22/cocaine-prices-the-war-on-drugs-and-economics.htm
follow the links and then add necessary information to your post - thus helping create a perfect blog!
D-A-I-L-Y- B-L-O-G.
ReplyDeletePiling up Red Bull cans and then taking pictures is fine - as long as you do not neglect your study!
Contra band can not have a price put on it.
ReplyDelete