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There is much discussion in the press about several states moving to legalizing marijuana, either for only medical purposes, or more extremely, for recreational purposes. Looking only at the economic impact (not moral implications) of such changes in the laws, discuss how the existing system of supply and demand for illegal marijuana will be changed with the new legalization.

  1. What will happen to existing supply avenues?
  2. Will legalization significantly change demand? How?
  3. Would one expect prices to change significantly? How?
  4. What would be the costs and benefits to governments, both in changes in enforcement requirements and in potential tax revenue?

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