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The Cross-Price Elasticity Of CVS

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The Cross-Price Elasticity of Demand measures the rate of response of quantity demanded of one good, due to a price change of another good. If two goods are substitutes, we should expect to see consumers purchase more of one good when the price of its substitute increases. Last September, CVS was the 1st major pharmacy chain in America to stop selling tobacco products in their stores. While the prescription sales at CVS continue to rise, the general merchandise that they sell fell nearly 8% last quarter; this shows that the quantity demanded of prescriptions increased in response to the decrease in the quantity demanded of CVS’s general merchandise. When CVS first announced that they would stop tobacco products in February 2014, and it also

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