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Lower Prices for Better Bud? Market Prices for Marijuana Approach Equilibrium

The cannabis trade and other businesses associated with the legal use of marijuana for medicinal purposes as deemed appropriate by a licensed doctor in legal medical marijuana states, especially in Colorado and California, has quickly become a booming industry.  To get an idea of just how fast this industry has grown, consider that it has been under three years since Colorado legalized the use of medical marijuana and dispensaries began popping up across the state, and already Colorado medical marijuana dispensaries out number Starbucks locations in the state by nearly five to one.

According to the medical marijuana dispensary or cannabis cannabis clinics interviewed on the CNBC Special, Marijuana USA, a sequel to Marijuana Inc., the networks most watched documentary every, marijuana prices began to drop with the upsurge in the number of medical marijuana dispensaries, MMJ patients and marijuana cultivators as more U.S. states opt to become legal medical marijuana states. Marijuana prices are dropping not only in medical marijuana dispensaries, but the street value of marijuana has a significant decrease as well.

Why is it that medical marijuana appears to be causing the prices of marijuana to drop?  After all, for the first time ever the sale of marijuana is regulated and taxed by state governments in legal medical marijuana states in the U.S.  Where as in the past, before the onset of decriminalizing marijuana use for medicinal purposes began, those whom sold or dispensed marijuana, at that time, which I might mention was only a few years ago, called 'drug dealers,' were charged no tax.  This might reasonably lead one to believe that the price of marijuana would rise with the new medical marijuana industry and taxation and regulation that accompany it.


So then why are we seeing the lowest prices on marijuana for decades (excluding Schwag of course, which is becoming nearly endangered in legal medical marijuana U.S. states)?  It turns out the answer amounts to nothing more than simple economics, supply and demand really with the former outweighing the latter.

In most legal medical marijuana states MMJ patients can grow their own marijuana for their own medicinal use.  Many believe that the amount of medical marijuana each individual medical marijuana patient is permitted to grow is in excess.  Colorado medical marijuana patients, for instance, are permitted to grow up to six cannabis plants at one time, with three in marijuana plants that are in the flowering stage and three that are in the vegetative stage of the cannabis plants grow cycle.  Adding to the supply of marijuana in legal marijuana states such as Colorado and California, while the number of medical marijuana dispensaries is growing at startling rates, the amount of medical marijuana patients per dispensary in states like California and Colorado is increasing rapidly.

What is behind the expanding medical marijuana industry causing marijuana prices to fall then, is the fact that the supply of marijuana is beginning to catch up with the outstanding demand.  As an economist might put it, it would appear that the price of marijuana in the United States is approaching an equilibrium market price.

Only time will tell where the marijuana trade's semi-emergence from the black market into a semi-regulated open market will take prices of cannabis on the streets and in legal medical marijuana dispensaries.