Answer true or false: Because the demand for illegal drugs is inelastic and the supply is elastic, policies that reduce supply in the illegal drug market reduce revenue for drug dealers

Economics Dec 13, 2020

Answer true or false:

Because the demand for illegal drugs is inelastic and the supply is elastic, policies that reduce supply in the illegal drug market reduce revenue for drug dealers.

Expert Solution

The answer is false.

Although a reduction in supply will reduce the quantity of drugs sold by dealers, it will not reduce their revenue since they will take advantage of the inelastic demand to charge higher prices to ensure their revenue is constant.

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