Did you watch the Superbowl?

1
Did you watch the Superbowl?

1. Yes, the whole thing.
2. Part of it.
3. No

2
If the police confiscate drugs and resell them at
market price, with no other punishment for
sellers or buyers, the outcome is the same as if
they didnt confiscate at all.

• True
• False

3
Why is that?

• The confiscations push the supply curve upwards.
  This results in a higher equilibrium price and
  lower consumption.
• If you dont see how this works, think about the
  comparison between sessions 2 and 3 of our
  experiment.

4
A credible education program about negative
health effects of a drug would

1. Shift the supply curve up.
2. Shift the demand curve up.
3. Shift the demand curve down.
4. Shift the supply curve down.

5
Why is that?

• Increased penalties shift the supply curve up.
  Equilibrium moves to a new point on the demand
  curve with higher price and quantity. If demand
  is inelastic, then percentage reduction is
  quantity is smaller than percentage increase in
  price. Expenditures Price x Quantity increases.

6
If the demand for heroin is inelastic, increased
penalties for heroin would cause total
expenditures on heroin to

1. Rise
2. Fall
3. It could rise or fall depending on whether the
   supply curve is inelastic or elastic.

7
And on to our lecture