If the elasticity of demand for cocaine is −.2 and the Drug Enforcement Administration succeeds in reducing supply substantially, causing the street price of the drug to rise by 50%, buyers will spend less on cocaine.

aa

To understand why buyers will spend less on cocaine when the street price rises, we need to consider the concept of price elasticity of demand.

Price elasticity of demand measures the responsiveness of quantity demanded to changes in price. If the elasticity of demand for cocaine is -0.2, it indicates that demand for cocaine is inelastic. Inelastic demand means that changes in price have a relatively smaller impact on the quantity demanded.

When the Drug Enforcement Administration succeeds in reducing the supply of cocaine substantially, the street price of the drug increases by 50%. As a result, buyers will likely face higher prices for cocaine, which may discourage them from purchasing the drug or may lead them to reduce their consumption due to budget constraints.

The reason buyers spend less on cocaine when the street price rises is because the demand for cocaine being inelastic means that buyers may not significantly adjust their quantity demanded in response to changes in price. Therefore, even with a substantial rise in price, the decrease in quantity demanded is not likely to be enough to compensate for the price increase.

However, it's important to note that this analysis assumes other factors, such as the availability of substitutes, remain constant. Additionally, the impact on total cocaine consumption may also depend on the magnitude of the supply reduction and the elasticity of demand for different market segments.