Due to marijuana sales being illegal in the country, the current supply chains are secretive for security purposes. Legalization of the product will eliminate the supply channels due to lack of any reasons to keep the business from the attention of the government. However, the legalization will introduce new channels because many people will opt to invest in the business from the growing demand. Therefore, the current supply avenues will diminish and lead to extinction due to establishment of new routes that are legal.
Changes in Demand
Legalization of marijuana will affect the demand positively. Most people do not understand the recreational and medicinal value of the drug. Legalization of the drug will expose many people to the benefits leading to heightened demand. In addition, many people avoid consuming the drug to avoid breaking the law (Arnold, 2008, p. 106). The legalization will remove the fear of incarceration and increase the demand from the new group of customers. Therefore, legalization will greatly change the demand positively.
Changes in Prices
The price of illegal commodities is high. The suppliers have to invest on additional measures to avoid facing the law. Consequently, the farms providing the substances have to invest in security and secrecy to keep the business functional. Such additional costs translate to higher prices for the ultimate product. The legalization will eliminate such additional costs due to lack of any need in keeping the business a secret. The reduction on the operational costs for the business will translate to a lower price for the final product (Caulkins et al., 2016, p. 71). Therefore, legalization of marijuana will lead to reduction in the price from the increased supply which will lower the prices.
Costs and Tax Benefits for the Government
The major beneficiary to the business will be the government. Legalization of marijuana will allow the government to create permits for the business which the investors will pay to acquire. In addition, the capitalists will pay taxes in accordance with the income generated from the business. The government will find it easier to collect taxes from the established businesses as opposed to the current sales that occur in secrecy. Therefore, it will be possible for the government to moderate the businesses by collaborating with the stakeholders and collecting taxes leading to increased revenue for the government.
References
Arnold, R. (2008). Economics. Mason, OH, USA: Thomson South-Western.
Caulkins, J., Kilmer, B. " Kleiman, M. (2016). Marijuana legalization : what everyone needs to know. New York, NY: Oxford University Press.
