What Would Happen to the Equilibrium Price of Marijuana If It Were Legalized?

The purchase or sale of marijuana is illegal in most states, however, there is still a demand for and supply of marijuana. Marijuana is the most widely used illicit drug in Western society, and probably in the whole world. For America, according to the National Drug Strategy Household Surveys, researchers have found that 42% of people surveyed in the U.S. have tried marijuana at least once. Interestingly enough, Netherlands had a mere 20% of residents surveyed reporting having tried pot at least once. The only other country that comes remotely close to that is New Zealand. Expenditure of marijuana in 1995 has been estimated to be a little over $5 billion (equivalent to about 1 percent of GDP), or $351 per capita. In recent years, the debate concerning the legalization of marijuana has intensified. Some argue that legalization amounts to surrendering too easily, whilst others believe that the “war on drugs” is unwinnable. It is argued that instead of fighting against marijuana at considerable cost, it may be better to legalize it and even use it to generate tax revenue. Several studies have analyzed the experience in the US where marijuana consumption has been decriminalized in some states. Studies using data pertaining to the whole population in the US find a significant increase in marijuana consumption due to decriminalization. In contrast, other studies involving youths find that decriminalization has no significant impact.
Imagine waking up tomorrow and finding yourself living in a country where the purchase and sale of marijuana became legal. What will happen to the current equilibrium, which will be represented by P1, now that the product has become legal? Well, I believe that it depends on what we as a society think will happen to the demand for and supply of marijuana. Let us say if the purchase and sale of marijuana are legal, then some people growing agricultural products will likely decide to switch over to a newly found, booming marijuana business that holds a more promising future. This is not only means that the supply of marijuana will rise, but it also means that agricultural products such as corn and wheat will fall. Assuming nothing else