A new study has found that demand for legal cannabis in British Columbia is significantly influenced by price, with consumers responding strongly to price decreases in the post-legalization market.
Researchers from the BC Ministry of Public Safety and Solicitor General and the Ministry of Agriculture and Food analyzed wholesale cannabis sales data from June 2022 to May 2024. The study, published in the International Journal of Drug Policy, used regression models to estimate the price elasticity of demand for regulated marijuana in the province.
The results show that a 10% drop in the price of regulated cannabis led to a 14% increase in the quantity purchased. This suggests demand in the legal market is price elastic—a shift from the pre-legalization era when demand was widely considered price inelastic.
The authors attribute this elasticity to competition between the regulated and unregulated markets. As prices in the legal market drop, consumers are more likely to abandon illicit sources and switch to licensed retailers. The study controlled for various product factors, including THC and CBD content, brand, and retail availability.
The findings have implications for policymakers and cannabis businesses in Canada, particularly regarding pricing strategies and tax policies designed to reduce illicit market activity and support the legal market’s growth.
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