The Equilibrium Price of Marijuana if It Were Legalized - Research Paper Example

The equilibrium price of marijuana if it were legalized Clinical studies reveal that marijuana is a drug, with a potential capacity to provide optimum medicinal advantage, at some point (Miller 81). There are drugs however, that if misused, instead of providing its maximum function could harm rather than provide healing. The authorities identify marijuana as one of these drugs. This is the reason that this kind of drug has a label as illegal in almost all parts of the world, because of its viewed potential harm over its weighed advantage. It is in this reason that the supply of marijuana may be scarce while the demand is relatively higher. One reason that prevents the supply of marijuana is not mainly the level of the actual production, but primarily due to the hesitation of producers to produce because of the legal restriction that the authority or government employed on the product. For this reason and due to the associated risk of distribution, suppliers and distributors priced marijuana at its optimum amount, leaving the consumer to pay for a relatively higher price for the final product. Concerning this, the work at hand, tries to consider the equilibrium price of marijuana if it were legalized by using the demand and supply analysis, so to illustrate the proponent’s point of view on this economic issue. Prior to providing the required answer of the above objective, let us first review the concept of the law of supply and demand. The law of supply and demand is a theoretical economic concept telling us the interaction between the supply of a product or service offerings and the demand for that offerings (Colander 795). This interaction has significant impact on price. Thus, generally, the price of the product will be higher if its supply is low, but the demand is high, and in contrast, the price will be lower if the supply is low and the demand is high (Kinney and Raiborn 645). Figure 1. Supply and Demand Curve We see in Figure 1 the actual interaction of supply and demand resulting to the equilibrium price where quantity demanded and supply demanded met. The equilibrium price will therefore vary, depending on the interaction between the supply and demand curves. As the supply is higher and the demand is lower, the price is expected to be lower (Figure 1.II). Correspondingly, as the demand is higher, but the supply is lower, the price will be higher (Figure 1.II). Now let us go back to the main point of this paper. The legalization of marijuana will significantly have an impact on the supply and demand curve of this product and particularly on its price. Considering at the moment, when marijuana is treated mostly illegal in many places, we can depict some meaningful observations. First, those who supply will at some point hesitant to pursue the production, resulting to low distribution and eventually minimal supply. If we will assume that the demand is constant, which means that the market for marijuana is still active even in the midst of prevailing legal constraints, then we can expect that the demand is still higher. This therefore leads us to the supply and demand curve for marijuana as illustrated in Figure 1.II, which indicates that the price for marijuana will be higher. On the other hand, since the government’s legal constraint against marijuana is present, the number of users will at some point has the tendency to decrease or remain constant, as those who might aim to make an attempt; especially new potential users may be hesitant to try at all. However, this point will never change the fact that the demand for marijuana is still higher even if the distribution has become too risky for the producers and distributors, which significantly is the reason of a potential higher price due to a limiting constraint linked to the actual distribution of supply. It is now of important consideration if things will change if the government will try to legalize the distribution of marijuana just like those other drugs out in the market for legal consumption. First thing that will come to mind is the elimination of potential barrier to distribution. This means that producers and distributors are now free to produce and distribute marijuana, because no legal barrier may hinder them to do so. On the other hand, existing and potential users will also have no hesitation to buy. Assuming that supply will rise and the demand will also surge high, then the determining factor now will be to know if the amount of supply will eventually cater to the actual prevailing demand. If for instance, the supply will still never cater to the actual demand, then we are most likely to expect the price equilibrium for marijuana as depicted in Figure 1.II. However, assuming that there will be over supply and the market has only enough requirements, the actual price equilibrium for marijuana will be lower as also depicted in Figure 1.II. Therefore, we have finally observed, based on the above assumptions that the most important effect of legalizing marijuana will most probably go first to the level of supply through the production or distribution. The demand will only have a little impact on the actual price equilibrium compared to the supply, if we based it on the above assumptions. It is the level of supply that will most probably start to initiate the remarkable changes, which is to be followed next by the change in demand. Now suppose we consider that the demand will first to initiate change, then we can most likely see a relevant picture of the supply and demand curve and price equilibrium for marijuana in Figure 1.I. Provided that the people are more aggressive to use marijuana legally, then the demand is higher and so the producers will find ways to increase the level of supply in order to cater to the higher demand at a higher price as well, as stated in Figure 1.I. In the same way, if the demand is lower, then the producers will most likely to refrain from the production just to meet the enough requirements that will only cater to the prevailing needs. We therefore see the two most probable scenarios that will take place if marijuana were to be legalized. It is just a matter of which among the economic assumptions we discussed will finally take place during the actual realization of this act. Works Cited Colander, David C. Economics. 3rd ed. New York, NY: Irwin/McGraw-Hill, 1998. Print. Kinney, Michael R., and Cecily A. Raiborn. Cost Accounting: Foundations and Evolutions. Mason, OH: Cengage Learning, 2012. Print. Miller, Norman S. Principles of Addictions and the Law: Applications in Forensic, Mental Health, and Medical Practice. San Diego, CA: Academic Press, 2010. Print. Read More