January 1st was a significant date for recreational marijuana use in the United States, as residents of Colorado became the first to be able to legally purchase their pot from brick and mortar storefronts. Long lines greeted those who came out to buy on the first day and demand has been so high that some recreational businesses had to close their doors within the first week of legal sales because they ran out of product.
The high demand for marijuana has had a larger effect than supply shortages: it has also affected the price for recreational consumers. At the end of the first week legal sales, recreational pot prices are around $45 for an eighth of an ounce—nearly double the price of medicinal marijuana, which has been selling for $25 for an eighth. In Colorado, sales are limited to one ounce per person, which would cost about $400 dollars.
“That’s just supply and demand,” said Aaron Smith, executive director of the National Cannabis Industry Association in an interview with Bloomberg. “As more businesses open and the businesses get a sense of what the demand is and are able to meet it, the prices will go back down.”
Brooke Gehring, owner of Patients Choice of Colorado told Bloomberg, “We probably won’t truly understand what that demand is for another three to six months.”
Another factor in the price is state and local taxes that have been levied on recreational marijuana sales, which are around 21 percent. However, the price of recreational sales is comparable to black market prices and, while some buyers have grumbled about the price, many have not been deterred. The in-store experience and peace of mind from purchasing marijuana legally are playing a large role in converting buyers from black market to legal sales.
Initial reports show that there have been approximately $5 million in recreational sales. According to Bloomberg Colorado expects $578 million in retail sales per year, which would yield approximately $67 million in tax revenue.
There is growing support for legalization nationwide, however tax revenues similar to those in Colorado are likely the strongest arguments for legalization when it comes to convincing state governments to reconsider their position on marijuana.
In the meantime, residents of Colorado will be toking and hoping that prices drop to something similar to medical marijuana by the end of the year.
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