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Abstract

The debate concerning the legalisation of marijuana is intensifying. As the price of marijuana would most likely decrease following legalisation, the law of demand implies that consumption would rise. But by how much? This paper analyses the effect of legalisation on consumption by using data from a specifically-conducted survey of first year students at The University of Western Australia. The results indicate that 53 percent of students have consumed marijuana with males exhibiting a higher intensity than females. The results also show that legalisation would cause consumption to increase by approximately 4 percent. Both legalisation and a 50 percent fall in the price would cause an 11 percent increase in the marijuana consumption. For all consumers, the gross price elasticity, which includes the effects of both legalisation and a price change, is estimated to be -.2. the net price elasticity, which takes out the legalisation effect, is -.1. Accordingly, marijuana consumption is estimated to be price inelastic. While these estimates are low, they are both highly significant, implying that "price matters", as does legalisation, even for marijuana smokers.

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