If Markets for Addictive Drugs Have a More Elastic Demand

question 14

Multiple Choice

If markets for addictive drugs have a more elastic demand curve than is often thought, and if addicts tend to be unstable people with low incomes, we might speculate that the most likely reason for the surprising elasticity estimates is that

• A)the substitution effect is smaller than expected because addicts aren't as addicted as we thought.
• B)the income effect has a more constraining effect than we had anticipated.
• C)addictive drugs are inferior goods.
• D)the income and substitution effects work in opposite directions.

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