Canadian CANNAINVESTOR Magazine October 2017 - Page 129

There are of course a different demand curve and supply curve at every point possible between any two lines. Also remember that the above linear relationship between price and demand on any given supply or demand curve is also over simplistic. For example, at a price of $10 the quantity demanded of a product may very well be only 1 unit but at $1 the demand may be for 25 units whereas a straight-line depiction would assume there is a 10-unit demand at a price of $1 (9 units at $2 etc).

Even the price ceiling of the black market can move. If government continues to increase the cost of supplying cannabis in the black market through ongoing raids and perhaps by increasing the punishment of conviction then you now also have a moving “price ceiling”. Over time, societal attitudes combined with perhaps more medical evidence related to cannabis consumption (less harmful than alcohol, medical benefits derived even from recreational usage, or what if the opposite of those?) … the entire demand curve itself will also shift on a macro level. Conceptually, all the above is logical, intuitive, and somewhat easy to both explain and understand; however, understanding how any one factor will influence demand and supply in any given jurisdiction (which in turn will affect black market participation rates) is quite complicated let alone the simultaneous impact of several changing factors. Most anticipate that edibles and beverages will be legalized within 18 months of the start of the adult recreational market – that too will affect demand and supply. How will supplying international markets affect supply? Will those revenues be used to subsidize domestic costs? Will companies be forced to ensure their medical patients are supplied before they can sell to the recreational market?

The above will necessarily affect companies that supply the market and for those that are publicly traded their performance, revenues, costs, and ultimately their share prices.

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