I believe that the introduction of a 20 % sales tax on marijuana will lead to a drop in sales, which is lower than 20%. In other words, I believe that demand for marijuana is inelastic, as the coefficient of change in demand will be between 0 and -1. When talking about the prices of marijuana, it should be noticed that it is a unique product. Drugs, such as marijuana, are similar to the example of gasoline provided by Stengel. If the price of gasoline goes up, it is unlikely that the demand for gasoline will decrease, as everyone will need gasoline for their daily needs regardless of price. This implies that the demand for gasoline is inelastic. However, a gas station cannot change prices without considering the prices of the competitors due to cross-price elasticity. Thus, a single gas station will not be able to change the price of gasoline without affecting the demand if all other gas stations leave the price of gasoline at the same level.
In the situation with marijuana, the demand for marijuana is unlikely to decrease, as people who need it will continue to need it regardless of the changes in price. Since local competition is inexistent, and the government imposes 20% taxes on all companies that sell marijuana, no effect of cross-price elasticity should be accounted for. However, there may still be some people who will not be able to afford the drug after the implementation of sales tax, which implies that the demand for the product will decrease. However, the drop in demand will not be drastic.
