1. Application of sweezy’s demand
curve in relation to Drug Cartels
By Callum Martin

2. What are Drug Cartels?
• Criminal Organisations developed primarily to
promote and control drug trafficking.
• The term was applied when the largest
trafficking organisations reached an agreement
to coordinate production and distribution.
• Actually no longer exist due to demerger.

3. How are Drug Cartels Structured?
• Falcons “eyes and ears”, lowest rank.
• Hitmen; armed groups carrying out
assassinations and defence of territory.
• Lieutenants; Second highest rank.. Management
of Hitmen.
• Drug lords (Capos); Highest position available,
supervises everything.

4. Mexican Drug War

5. Know any of these faces? $$$

6. Facts and Figures of Mexican Drug
War
• 50,000 troops actively fighting drug war
• 3,000 soldiers killed in 6 years.
• The Zeta cartel; largest, commands 10,000 gunmen stretching from the Texas border
to Central America.
• The United Nations estimates that the U.S. narcotics market is worth about $60 billion
annually.
• Of which Colombian and Mexican cartels take in $18 billion to $39 billion from drug
sales in the US each year.
• In 2007 Mexican authorities made the largest cash seizure in history when they
discovered $205 million in the home of a suspected cartel supplier of meth-precursor
chemicals. The money weighed more than 4,500 pounds.

7. Extent Of US Drug Problem

8. Sweezy and this Demand Curve of
his..
• Created by Paul Sweezy, a Marxist Economist in 1939.
• The kinked demand curve theory is an economic theory regarding
oligopoly and monopolistic competition.
• Classical economic theory assumes that a profit-maximizing
producer with some market power (Oligopoly) will set marginal costs
equal to marginal revenue.
• This result does not occur if a "kink" exists. Because of this jump
discontinuity in the marginal revenue curve, marginal costs could
change without necessarily changing the price or quantity

9. So Here it is..
• p*, is profit maximizing for any marginal cost curve (MC) that cuts the
vertical section of the marginal revenue curve (MR)
• The kinked demand theory of oligopoly behaviour predicts that prices
are likely to remain unchanged for small changes in costs.
• Unfortunately, this theory is silent on how price is initially set and,
hence, does not explain price levels.

10. So how does this all relate to Drugs
then?
• Well if Cartels don’t need to Compete on Price, then they
will find non-pricing strategies to try and gain market
share.
• This is the root of Mexico’s problems as Cartels have
realised what Sweezy was on about.
• They turn to murder to eliminate rivals.

11. Thanks for listening
Now For A Quiz!

12. How many trucks leave from Zetas'
stronghold in north-eastern Mexico to
cross into Texas on a daily basis?
A) 85
B) 850
C) 8500

13. How much does a Kilogram of Mexican
Black Tar Heroin Cost?
A) $12,890
B) $78,000
C) $33,000

14. And Finally, How Often is there a Drug
related murder in Mexio?
A) 98 minutes
B) 11 minutes
C) 3 hours