Wednesday, May 07, 2008

Unit 2: Demerit goods: Cannabis reclassified

The BBC reports in this video and article that cannabis is to be reclassified as a class B drug

a) What are the 2 criteria for a demerit good?
b) To what extent is cannabis a demerit good?
c) To what extent do you think this stricter regulation to try and limit supply will decrease the market failure?
d) To what extent do you think a stratagy which aimed to reduce demand for cannabis by imposing a tax on cannabis and/or improving information to cannabis users would be more succesful in reducing the market failure?

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