Case: Market for Addictive Substances around Fall-valley College

Fall Valley College is a reputed degree granting college offering education at undergraduate
level. Springvale, the town neighboring the college, has been witnessing heightened sales of
addictive substances targeting the vulnerable student population of the college (An addiction is a
pattern of compulsive and uncontrolled use of a substance). The lack of proper policing in
Springvale has been cited as one reason in more students becoming prey to the cartel of informal
sellers peddling addictive substances. But such substances face different demand conditions
among 2 categories of users- Casual and Hardcore users as shown in Figures 1 and 2. The heavy
smoker or the heroin user may bitterly regret the acquired habit, but such habits are extremely
difficult to break after they have become established. A regular user of cigarettes or heroin is
much more likely to desire these substances than is a nonuser. Moreover, the demands for
addictive substances are quite price-inelastic. One policy approach is to prohibit the sale and use
of addictive substances and to enforce prohibition with criminal sanctions. Economically,
prohibition can be interpreted as a sharp upward shift in the supply curve. After the upward shift,
the price of the addictive substance is much higher. Estimates are that such substances sells for
multiple times its free-market price. Making use of the panel of graphs (Fig.1. and Fig.2),
elucidate on the following

1. How does the demand for addictive substances differ among casual and regular users?
Reflect on the graphs in Fig.1 and 2.
2. Springvale Municipality is planning to enact a prohibition by restricting the supply of
such addictive substances. What is the effect of supply restrictions by Springvale
Municipality on the consumption of addictive substances?
3. And how does the prohibition affect the injuries to self and to the Springvale
Community?
4. Should the College Administration request Springvale Municipality to come up with
more supply restrictions or rather invest more efforts into treatment and counseling?
 Figure 1: Demand for Addictive Substances by Casual Users

Figure 2: Demand for Addictive Substances by Hard-Core Users