Several weeks ago, one of my Facebook friends in Regina complained that Halls cough drops are $2 in the vending machines at the university but candy bars and chips are only $1.75. Here's the machine he was talking about:
In fact the only other item with a $2 price is a bag of gumdrops (or whatever those things are). Everything else is priced at $1.75 or less. All the other vending machines I have seen here have the same pricing. Here is a close-up of the Hall's in the vending machine.
My immediate reaction was "Price Elasticity of Demand".
It is possible that Halls are a bit more costly to produce; after all, they are individually wrapped. But then, Excel gum is blister-packed and its price is only $1.75.
My sense is that if you have a cough and/or a sore throat, you are more likely to be willing to pay more for cough drops. I.e., your price elasticity of demand is less than it is for snacks and treats.
If you have a cough and/or sore throat, you might consider a substitute to sooth it. Mentos, for example, right next to the Halls, might work just as well for some people. But if you are feeling somewhat desperate, Mentos are not a good substitute. Neither is walking or driving to some other retail outlet off campus just to look for Halls at a lower price.
At the same time, not many people looking for a snack buy Halls. That surprises me a bit because when we were young, we absolutely loved Smith Brothers wild cherry cough drops as a candy snack. We could buy a small box of two cough drops for a penny. But because Halls do not seem to be a good substitute for other candy, they don't lose much by pricing Halls a bit higher.
And who is "they"? It's the people (university!) who control the vending machines. So they set the price of snacks and treats a bit lower because there is a somewhat higher price elasticity of demand for them -- a reasonable substitute is to wait or to plan ahead and bring your own. But when you are suddenly afflicted with a cough or sorethroat, waiting doesn't work; and how many people carry cough drops with them "just in case" (I do, and probably some of you do, but not many I'd guess).
With fewer good substitutes available for Halls, the price elasticity of demand is lower than it is for snacks, and so the vending machine operator can improve profits by setting a higher price for Halls than for snacks.