Question

Suppose that legalizing the use of marijuana would decrease its price by 86 percent. If the price elasticity of demand for marijuana is -2.50, what would be the percentage increase in the quantity of marijuana demanded from legalizing marijuana?percent. (Enter a numeric response using a real number rounded to two decimal places.) Suppose instead that the price elasticity of demand for marijuana is-0.36. What would be the percentage increase in the quantity of marijuana demanded from legalizing marijuana?percent (enter your response rounded to two decimal places) The higher the absolute value of the price elasticity of demand for marijuana, the the increase in marijuana use that would result from legalization greater less

Answer 1

a) When the drug is legalized the demand will increase, let demand be (x).

-2.50 = (x) / 86

( x) = 2.50 x 86

= 215%. the demand for marijuana will increase by 215%.

b) When the price elasticity is -0.36 and the price decrease by 86% then the demand will increase by -0.36 = (x) / 86

(x) = 0.36 x 86

(x) = 30.96.

The demand will increase by 30.96%.

c) the higher the value of price elasticity the "greater" the increase in marijuana after legalization.