The demand for drugs

A persistent problem facing our society is the use of illegal drugs, such as heroin,
cocaine, and crack. Drug use has several adverse effects. One is that drug dependency
can ruin the lives of drug users and their families. Another is that drug
addicts often turn to robbery and other violent crimes to obtain the money needed
to support their habit. To discourage the use of illegal drugs, the U.S. government
devotes billions of dollars each year to reduce the flow of drugs into the
country. Let’s use the tools of supply and demand to examine this policy of drug
interdiction.
Suppose the government increases the number of federal agents devoted to
the war on drugs. What happens in the market for illegal drugs? As is usual, we
answer this question in three steps. First, we consider whether the supply curve or
demand curve shifts. Second, we consider the direction of the shift. Third, we see
how the shift affects the equilibrium price and quantity.
Although the purpose of drug interdiction is to reduce drug use, its direct impact
is on the sellers of drugs rather than the buyers. When the government stops
some drugs from entering the country and arrests more smugglers, it raises the
cost of selling drugs and, therefore, reduces the quantity of drugs supplied at any
given price. The demand for drugs—the amount buyers want at any given price—
is not changed. As panel (a) of Figure 5-10 shows, interdiction shifts the supply
curve to the left from S1 to S2 and leaves the demand curve the same. The equilibrium
price of drugs rises from P1 to P2, and the equilibrium quantity falls from Q1
to Q2. The fall in the equilibrium quantity shows that drug interdiction does reduce
drug use.