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Economics of Addictive Substances

Abstract

The theme of drugs and addiction has many misapprehensions about its utilization and control. This implies that the consumers of drugs are indifferent to changes in price. Controlling the availability and regulation of these banned commodities is expected to be more efficient measures to reduce demand. Economics provides both theories and practical evidence to explore issues influencing current drug usage. It also highlights the costs to humanity of the harm these substances cause and the cost-effectiveness of different policy alternatives. This paper aims to assess the dynamics of the addictive substances in terms of impacts produced on economy by its usage. Furthermore the paper intends to provide statistical comparison of United States and the European Union in drug usage; moreover it intends to reason the increase of its usage and the demand supply ratio.

Table of Content

Abstract2

Discussion4

Introduction4

History of Economist and Addiction5

Statistics in United States6

Statistics in European Union9

Conclusion13

References15

Discussion

Introduction

Addiction is the consumer journeys from treating the addictive material (for instance, cocaine or marijuana) as a “lavishness” to treat that similar substance as a “necessity”. Research indicates that Price Elasticity of Demand for the drug contracts when the degree to which its usage is affected by price reductions. Conventional process of the theory of demand and supply, requiring balanced consumer behavior, give an impression of no response when applied to the addicted consumer. Price becomes less significant to the addicted purchaser. Consistent with the clinically established elements of obsession, including dependence and forbearance, the market as functional to this consumer is no longer characterized by choice. The Price Elasticity of Demand retreats to the lowest points. In simple context, huge fluctuations in price will not affect the obsessed individuals demand for the addictive substance or product. This becomes excessive difficult to explain as under normal circumstances price elasticity becomes one of the biggest elements considered when making strategic decisions. Normally the price of a commodity and its demands are inversely proportional. This means that if one goes up the other is destined to fall. Economists tend to explain that when a person is addicted to certain commodities they do not react to changes in price of that commodity. They will purchase and use the commodity as it becomes a necessity rather than a luxury as discussed above. Therefore the commodity does not react to any of the elasticity's. The effect of income elasticity and cross elasticity relatively remains the same as of price elasticity.

There are substantial critics advocating the noneconomic arguments for and against different methods of dealing with addiction. There are also opinions of experts containing noneconomic arguments for and against policies being drafted through reducing prices of addictive substances, legalization of prohibited materials and the taxation such addictive material. Following is the detailed analysis of the history of economics of addiction, the prevalence of drug usage in United States and the European Union and recommendations for control of addictive substances being used across the ...