The Price Elasticity of Demand for Illicit Drugs: A Systematic Review

By Jason Payne, Matthew Manning, Christopher Fleming and Hien-Thuc Pham

Three pillars—harm reduction, demand reduction and supply reduction—underpin the harm minimisation framework of Australia’s drug policy. Much of the activity undertaken by law enforcement is aimed at reducing the availability of illicit drugs and thereby increasing price and reducing demand. This article presents a contemporary, systematic review of research exploring the price elasticity of demand for illicit drugs. Overall, the results indicate that the demand for illicit drugs is, on average, weakly price inelastic—a 10 percent increase in the price of illicit drugs results in a decrease in demand of approximately nine percent. The degree of elasticity varies by drug type, with the greatest elasticity indicated, albeit on a small number of studies, for amphetamine-type substances. The international differences seen point to a need for more Australian research, ideally with robust experimental methodologies and across a range of drug types.

Canberra: Australian Institute of Criminology. 2020. . Trends & issues in crime and criminal justice no. 606.