Estimating Elasticities of Deman for Cocaine and Heroin with Data from the Drug Use Forecasting System

Elasticities of demand for cocaine and heroin are estimated as the product of the elasticity of demand with respect to an intermediate variable and the elasticity of the intermediate variable with respect to price. The intermediate variable used here is the percent of arrestees testing positive for the drug. The demand for cocaine, at least, appears to be substantially more responsive to price changes than had previously been supposed.