Weed Has Always Had a Bad Brand

In the year 2017, California legalized marijuana for people who were 21 years old or older. Naturally, pot has always had a bad stigma because it was illegal for many years. However, ever since it became legalized, it affected the economy positively. Cannabis helps the economy because it increases tax revenues, increases GDP, and opens up new job opportunities. It only got legalized 2 years ago, only time can tell how much profits will grow in the future. Firstly, since marijuana became legalized, more cannabis dispensaries became opened.

More jobs related to selling marijuana became available. People who are into cannabis can now work legally and contribute tax money from their personal income checks. On top of that, marijuana is sold at different prices and that helps with budget constraint.

Everyone has a different budget constraint so by varying the prices, the consumers are more likely to still have enough income to purchase cannabis. The consumer equilibrium is met at the quality of the product and the price that fits the budget constraint.

Based on studies, when marijuana was first legalized, the cannabis industry was projected to add $1.5 billion that year, $4.27 billion dollars in 2018, and $6.45 billion dollars in 2020. The marginal cost is more money being invested into dispensaries, marijuana farms, transportations. However, the marginal benefit is an increase in tax revenues and more job opportunities. With more jobs opening up, the workforce productivity increases brings in more profits for the economy and grows GDP.

Secondly, despite positive results showing that the economy is benefiting from the legalization of marijuana, people still assume that the demand is going to diminish at some point since the prices are expensive.

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While it’s accurate that if the prices keep on expanding more than the demand rate, people will start buying less of the products. However, there are special situations that don’t affect the income elasticity of demand and smoking is one of them. Cannabis is similar to tobacco because consumers get addicted to smoking. For the people that do consume marijuana daily, the demand rate does not decrease. The demand rate only decreases for the people who do not smoke pot daily. Since they aren’t used to consume marijuana, they don’t want to spend their income on that. The elasticity between income and marijuana demand is very inelastic. Even if the prices increase, the demand rate will not diminish. In addition, since marijuana prices are high, the supply rate is just as high as well. Producers see potential profits in the market and will supply more products to dispensaries.

Since the demand rate for people who don’t smoke daily decreases, the supply curve has to shift leftward to adjust for price and quantity equilibrium. Therefore, prices will eventually drop to meet the demand of those that don’t consume cannabis on the daily. In conclusion, the legalization of marijuana contributed good profits to the economy. More jobs in the marijuana field became legal and allowed people to work which equates to an increase in workforce productivity. These jobs helped brought in more tax revenues from personal income checks. California’s GDP also got a boost due to the new jobs being created and more people working. The social benefits would be more people working without the fear of getting drug tested. Also, black market jobs should decrease since more people can work legally in the cannabis industry. On top of that, consumers are inelastic to the price change. They are addicted to smoking cannabis so they always need it. It hasn’t been that long since the legalization happened, but based on the results so far, it looks like the sky’s the limit.