How does the imposition of a penalty for possessing an illegal drug influence demand, supply, price, and the quantity of the drug consumed?
What will be an ideal response?
If the penalty is levied on the buyer, the penalty is subtracted from the maximum willingness to pay for the good. The supply curve remains unchanged and the demand curve shifts leftward, so that the vertical distance between the initial demand curve and the demand curve with the penalty equals the dollar value of the penalty. In this case, the equilibrium price of the good falls and the equilibrium quantity decreases.
You might also like to view...
If the nominal interest rate is greater than the real interest rate,
A) it is an indication of economic growth. B) inflation must be occurring. C) lenders must lose because they can only make loans using the real interest rate. D) the real interest rate must be negative. E) None of the above answers is correct because it is not possible for the nominal interest rate to exceed the real interest rate.
Production points inside the PPF are
A) efficient but not attainable. B) efficient and attainable. C) inefficient and not attainable. D) inefficient and attainable.