Students apparently consume mass quantities of the performance-enhancing drug Adderall during exam time. Normally the price is $3 for 10 mg, but it rises during exam week to at least $5.
One student reports that in his suburban Dallas hometown, drug dealers, realizing this price variation, speculated by buying up large supplies of the drug at $3 and dumping them on the market during exam time, hoping to sell at $5.
They didn’t realize that this large increase in supply would cause the price to drop below $5. Indeed, so many dealers engaged in speculation that there was a surplus at the usual equilibrium price of $3. Students were able to buy the drug for only $2 as dealers sold off their excess supply. One imagines that the dealers were less enthusiastic about speculation the next year and that the exam-week price stayed above $3. (HT: AM)
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@BSK:
These “students” suffer the same fate as professional athletes. Grades, when placed on a curve, are a zero sum game. If some students are taking Adderall and are moving ahead of you on the curve (just as if some athletes are taking steroids and are becoming better athletes), they have two unsavory choices: either abstain and suffer or abuse the drug and suffer. Don’t blame the players for the messed up incentives of the game–blame the regulators of the game themselves.
Its interesting how speculation can make all investors gain money, or lose money. In this case, investors lost money. The main supplier (the pharmacy) sold its stock to other suppliers (students selling to other students), who engaged in competition. If supply of Aderall was finite, and all of the pills were distributed among students, would it be legal for them to try to set a price above the equilibrium price? If all the students joined into one single company, form a “pharmacy,” they would have sold the Aderall at the expected $5 dollar price, but because of the excessive amount of suppliers, suppliers had no control over the price of Aderall. Even if supply of Aderall was not finite, there would only be two pharmacies competing, leaving the students with more profit than they earned as individuals.
@BSK: There wouldn’t be enough room in jails. Adderall and other performance- and cognigtion-enhancing drugs are very widespread in both collegiate and corporate environments.
You may not like it, but it’s incredibly pervasive. I’d suggest that you 1) get a little more educated about the situation, and 2) try to think of something more constructive than jailing the top performers in college. You do see how that could backfire on society as a whole, right?
It is certainly true that the demand for Adderall has increased during exam time. Because the demand for Adderall has rise so does the equilibrium price rise if the supply stays constant. However when drug dealers had expected the rise in price of Adderall to happen they bought large supplies of Adderall, which increased the supply. Without realizing it the supplier had increased the supply in which there was more supply than demand therefore forcing the equilibrium price to go down.
For the next year dealers will be less enthusiastic about the speculation that the exam-week price stayed above $3. However the next year the price of the Adderall will be above $3 now that there will be fewer suppliers and the demand increases which increase equilibrium price.
Its obvious these students have no idea about market equilibrium price and demands. Otherwise, they would have understood that unless a very small group of people were making the drug available, a surplus would exist that would push the price downward. If I were a student, I would simply wait until these irrational people go to the pharmacy before exam time, buy the drug at the price the store sets, and later, when they have a smaller demand that they expected and are forced to bring prices down, I’d buy from them. Of course, some people might argue that if other students were rational, they would follow my same plan and this would create a shortage. However, the truth is that most people think irationally.
@BSK: seriously? you’d be locking up about 80% of college kids. most of them have at least tried performance-enhancing drugs at some time.
unfortunately for many who may become dependent on them, they won’t make kids smart who simply don’t know the material in the first place. they might help people stay up to study, and focus when the time to perform comes, but amphetamines do not magically generate ability.
magically generating income is another story.
Brooks and John D-
I was being somewhat facetious, but your comments demonstrated my point exactly. If these were athletes, would there be much sympathy or apologists? Some, yes, but people would be quick to get sanctimonious. If these were another type of illegal drug or controlled substance, would we be pointing out the ridiculousness of jailing them? No.
But when it’s a problem that is generally unique to white, middle and upper-middle class college kids, suddenly our response is very difference.
Do I really think these kids should be in jail? No moreso than I think steroid users or marijuana users should be. Which is to say, not at all. I would challenge you to find a quantifiable difference between these groups?
The drug dealer is trying to make the price go up, but he does not realize that by increasing his supply, he would lower the price equilibrium. If the supply goes up, the price will go down normally because demand stays the same and to sell of supply, the supplier has to lower the price. In this case, the demand would normally go up during exam time, but the seller is not realizing that as he increases the price, the quantity demanded will lower, and will cause people to substitutes Adderall for other stimulants like coffee or smoking. Because the price of related goods of Adderall (Coffer, Cigarettes) is cheaper than Adderall, then the demand for Adderall would shift rightward, meaning that it will decrease. The reason why the price of Adderall did not rise at all and actually decreased to $2, is because the demand for Adderall, although it increases in exam time, it decreases because of related goods being cheaper than $5 (Coffee, Cigarettes) and the supply increased so much the there was surplus. The demand did not shift rightward as much as supply did, and may have even decreased because of other related goods becoming cheaper. This shows that the equilibrium price will lower because of surplus in order to sell all excess supply and so that is why the price of Adderall decreased by more than normal price.