There is a debate about whether sterile hypodermic needles should be passed out free of charge in cities with high drug use,. Pr

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2 months ago

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There is a debate about whether sterile hypodermic needles should be passed out free of charge in cities with high drug use,. Pr

oponents argue that doing so well reduce the incidence of diseases, such as HIV/AIDS, that are often spread by needle sharing among drug users. Oppenents believe that doing so will encourage more drug use by reducing the risks of this behaviour. As an economist asked, to assess the policy, you must know the following :
i) How responsive the spread of diseases like HIV/AIDS is to the price sterile needles and
ii) How responsive drug use is to the price of sterile needles.
Assuming that you know these two things, use the concepts of price elasticityof demand for sterileneedle and the cross-price elasticity between drugs and sterile needles to answer the following questions.
a) In what circumstances do you believe this is a beneficial policy?
b) In what circumstances do you believe this is a bad policy?

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1 answer:

Scilla [3.8K] · Answer 1 · 2026-03-16T19:15:25+03:00

Answer:

a) This policy would be advantageous if the demand for sterile needles has elastic characteristics and the cross-price elasticity of demand linking drugs and sterile needles is high and

positive.

b) This policy would be unfavorable if the demand for sterile needles is characterized as inelastic while the cross-price elasticity between drugs and needles is high and

negative.

Explanation:

a) Under what conditions is this policy viewed as beneficial?

This policy is advantageous when the demand for sterile needles is elastic and the corresponding cross-price elasticity with drugs shows a positive and high relationship.

The elastic demand for sterile needles indicates that the quantity demanded increases more significantly in response to price changes.

The positive cross-price elasticity suggests that as the price of needles decreases, the demand for drugs decreases, assuming they are substitutes. Therefore, as the price of sterile needles approaches zero, the

demand for drugs diminishes.

b) Under what conditions is this policy seen negatively?

This policy turns unfavorable when the demand for sterile needles is inelastic and the cross-price elasticity relating drugs to needles is high and

negative.

An inelastic demand for sterile needles suggests the quantity demanded does not increase much with price reductions.

A negative cross-price elasticity indicates that the two products, drugs and sterile needles, are complements. Thus, as the price of sterile needles drops to zero, the demand for drugs rises.