Most people will tell you that Demand will increase because its legal status will send people the message that it’s ok to smoke, but that argument *assumes* that the prohibition actually prevents people from smoking at least to some degree. The reality is that the people who want to smoke are doing so already and the people who have no interest in it aren’t going to start just because it’s legal.

In fact *every* country in the world that’s decriminalized marijuana has seen a *reduction* in its rate of use due to it no longer being “illegal and mysterious”. It’s true that legal Supply will increase (from zero to something else) and an increase in supply usually drives down prices which in turn increases demand. But this argument assumes that marijuana is a “normal” product, it’s not. Marijuana is an inelastic product just like gasoline – increases in price do little to drive down demand, reductions in price similarly do little to increase demand. That’s why the prohibition’s stated goal of driving up prices has done little to reduce demand for the stuff.

So while the Demand for and Supply of LEGAL weed will increase, the demand and supply of marijuana altogether (legal and illegal) will pretty much remain unchanged. Illegal sales will simply be replaced by legal sales.

Prices will decrease because it costs more to produce a product illegally than it does legally. Illegal producers run the risk of getting caught and therefore need compensating for taking this risk, legal producers don’t take this risk and therefore don’t require this extra level of compensation, so prices will go down.

State Revenue will go through the roof. Basically the state can set any level of taxation it wants as long as it doesn’t drive prices up higher than the illegal prices. It’s important that 100% of consumers feel an incentive to purchase legal weed rather than to continue to buy from the black market.

As mentioned, overall demand and supply will be pretty flat and the same is true for the quantity demanded and supplied. This is because smokers have a comfortable level of consumption that they’re in all likelihood already at, legalizing supply and reducing prices will change where smokers consume their weed but it won’t significantly change how much they consume. Of course the first month will be party time and usage during this time shouldn’t be assumed to reflect long-term consumption rates.

There are other factors to consider as well. For one thing there may be a significant number of people switching from consuming alcohol to consuming the far safer drug, marijuana. This is going to negatively impact the state’s alcohol tax revenue, but this’ll obviously be offset by the marijuana tax revenue it generates. The saving to society in reduced medical costs through lower alcohol consumption could be quite significant.

Annually, 800,000 people are arrested for possessing marijuana. I don’t how many of these occur in Cali but eliminating these arrests may allow police forces to reduce staff and therefore reduce state spending.

There are significant societal benefits that can be taken into consideration as well but you only asked about the economic ones. GL!

Demand = Stay the same
Supply = Increase
Quantity demanded = Stay the same, perhaps slight increase
Quantity supplied = Increase
State revenue = Increase
Price of the good = Decrease

Those are your answers, good luck coming up with the explanations.

HINT: Draw a supply and demand graph and then shift the supply curve over to the right