Graph description:
The supply of opium in Afghanistan decreases from S to S1. This is a shift of the supply curve to the left. The equilibrium price increases from P to P1. The equilibrium quantity decreases from Q to Q1.
The United Nations office on Drugs and Crime as identified that the production of Opium in Afghanistan has dropped sharply. An estimated 22% of cultivation has decreased and thereby, 10% of production has decreased. Even though these figures could in a way be hurting the opium suppliers, the UN believes that it is a “welcome piece of good news”. 60% of the country’s cultivation takes place in Helmand, which has been affected most significantly. It is found that drug trade threatens the legitimacy of Afghanistan.With this current decrease in production, 20 provinces in Afghanistan are poppy-free however, Chris Morris, a BBC reporter says that refining and trafficking of drugs still exists. The UNODC’s executive director says that the other drugs in Afghanistan still have “catastrophic consequences”, some of which include funding criminals, insurgents and terrorists, encouraging corruptions and undermining public trust.
Even though this cut down in production of opium could be a sign of progress in Afghanistan, some analysts believe that it is just a tactic that producers are using. Because the world’s heroin prices have come down, this fall in opium production may be a “temporary tactic by suppliers to drive prices back up”. Afghanistan in fact, produces 90% of the world’s heroin. This tactic could clearly be true, as the prices for both opium and heroin will gradually rise.
Kanika's Economic Blog 