Problem 92 Snacks Beer and Marijuana Snack food vendors and

Problem 9-2 Snacks, Beer, and Marijuana: Snack food vendors and beer distributors ean some monopoly profits in their local markets, but seem the erode from various substitutes. When California voted on legalizing marijuana, which side would you think that California beer distributors were on? What about snack food vendors? Why?

Solution

If marijuana is legalized, demand for beer which is a substitute addictive good, will fall since a substitute product (marijuana) is (legally) available. So, beer distributors will oppose the move to legalize marijuana since lower demand for beer will lower revenue and profits.

Snack food vendors will likely remain unaffected since snack food is not a substitute of marijuana. Snack food vendors will remain indifferent regarding this move. But if snacks and marijuana are consumed together (if they are complements), then demand for snack foods will go up and snack food vendors will welcome the move.