Pot Prices Drop with Legalization and Increased Supply

It doesn’t happen often, but when it does, it makes a lot of people happy. In this case, it is the declining price of pot.

As of March 2016, dispensaries in Washington State were selling a gram of weed for $9.32, according to a Washington Post report citing the state’s Liquor and Cannabis board, while the wholesale price per gram was just $2.99.

Compare those prices to September 2014, when pot cost around $25 per gram. Only a year later, it had dropped more than 50 percent to $11 per gram.

Although prices initially went up after pot was legalized, there was obviously a surge linked to increased demand and limited supply, said Steve Davenport of the Pardee RAND Graduate School, who helps aggregate data from Washington’s cannabis board.

Since then, prices have been coming down at a rate of two percent per month, Davenport told the Washington Post, and they could potentially shrink 25 percent every year.

“It’s just a plant,” Professor Jonathan Caulkins of Carnegie Mellon University told the Post.

Caulkins said marijuana could become so inexpensive that certain types will be given away for free.

“There will always be the marijuana equivalent of organically grown specialty crops sold at premium prices to yuppies,” Caulkins said. “But at the same time, no-frills generic forms could become cheap enough to give away… the way bars give patrons beer nuts and hotels leave chocolates on your pillow.”

These bargain prices are not unique to Washington State. Colorado has also seen prices plunge.

Fortune Magazine reported last summer that an eighth of an ounce cost between $30 and $45—notably less than the $50 to $70 it was going for the year before.

As pot prices trend downward, there are positive (for the buyer) and negative (for the seller) consequences. Lower prices are not great news for the state either because pot is taxed by sale; falling prices mean less money for the government.

On the other hand, reasonably priced pot could encourage people to buy from legal sources, undercutting the black market, which ultimately means less need for law enforcement.

But, even with pot prices dropping, new businesses continue to crop up, Denver-based KUOW radio reported.

“Standard theories of economics would only suggest entry into an industry when people see that it’s profitable,” said Tracey Seslen, a lecturer at the University of Washington.

As legalization becomes more and more prevalent around the country, the increase in pot production and drop in prices will produce pros and cons.

Whether the pros outweigh the cons is something the industry will have to observe over time and adjust to accordingly.

(Photo Courtesy of Tumblr)

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