elasticity of demand is critical to understanding the impact of punishing the suppliers
Hi Michelle
Great post on the topic. Indeed elasticity of demand is critical to understanding the impact of punishing the suppliers. Enforcement increases the costs of supplies that have to respond by increasing the cost of illegal drugs. This is passed down to the consumer, which induces low consumption when the demand is elastic. I also agree that the increasing prices will not lead to less use of the product. Instead, it will increase total spending. Your views on fuel-efficient cars are also right. People look for many things that “suit their needs, such as airbags, cameras, touchscreen technologies, and all the gadgets that make a car more user friendly.” This means buyers are not just looking for one thing, such as efficiency in fuel consumption, but they also consider several other factors. The buyer does not just need a car, but they are also looking for comfort and several other requirements, which informs the buyer decision.
Bottom of Form
Post 2
The main principle of the invisible hand is that when the prices of goods increase above the cost of producing the product, the high profits received will motivate producers to increase production. The high prices mean that the goods supplied are not adequate to meet the demand in the market, which means the market still needs more suppliers. Hence, the market should be left to regulate itself through the forces of demand and supply. When the supply is high, and the demand is low, the price will be low, meaning production will go down (Schotter, 2016). This is some form of a feedback system that guides production and coordinates the whole process of producing the right amount of goods in the required proportion. In a free economy, there is no intrusion by the government or the political class on various functions in the market. Hence, the market is controlled solely by demand and supply. An example of a market in the United States economy where everything is controlled basically by supply and demand of goods.
Reference
Schotter, A. (2016). Free market economics: A critical appraisal. Macmillan International Higher Education.