What is the elasticity of demand for illegal drugs? Intuition suggests that demand should be inelastic. If cocaine, heroin, and the rest are addictive, people who use them will not find it easy to kick the habit just because the price goes up a bit. Econometric studies of the question (…) tends to confirm the hypothesis of inelastic demand. For example, one survey of the literature found that a 1% increase in the price of cocaine would tend to reduce consumption by only 0.51 to 0.73 percent, solidly in the inelastic range.
This gives us our first clue as to why the war on drugs isn’t going so well. The main strategy is interdiction of supply. To the extent interdiction succeeds in reducing supply, it drives up the market price. With inelastic demand, a higher price means more revenue for the drug cartels.” —Why It’s Obvious We Are Losing The War On Drugs