Examining the cause of inelasticity in tobacco

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Examining the cause of inelasticity in tobacco

Price elasticity of demand refers to the extent to which use of a product falls or rises after increases or decreases in its price. If price elasticity of demand for a product were very low—that is, if it were inelastic—then demand would fall or rise only slightly in response to price changes.

For instance, if price elasticity for a particular good were about —0.

The Effects of Price on Alcohol Consumption and Alcohol-Related Problems

Demand for a good with high price elasticity would fall much more sharply in response to price increases. If price elasticity of demand for a good were about —1.

While demand for tobacco products is not as elastic as demand for many other consumer products 1 research has consistently demonstrated that increases in the price of tobacco products are followed by moderate falls in both the percentage of people smoking and the amount or number of tobacco products that remaining smokers consume.

Examining the cause of inelasticity in tobacco

However there is no doubt that they do. The extent to which demand for tobacco products responds to changes in price is an empirical question, the answer to which can be ascertained by measuring trends in consumption as prices and other relevant factors change. Depending on the size of the price increase, reduced consumption of tobacco products following increases in tobacco taxes can be quite substantial.

The review conducted by the International Agency for Research on Cancer published in concluded that studies on the impact of price increases on aggregate demand in high income countries on average find price elasticity of about—0. Many studies examining the price elasticity of demand have used aggregate data—that is, data at a country or state level on the total amount of tobacco purchased or taxed for the entire population.

Some of these studies have analysed changes in taxable or reported sales of all tobacco products, and some have looked at cigarettes alone. Some have measured the weight of product sold, others the number of units.


Some studies have compared consumption in the same jurisdiction with different prices over time time-series analyses. Others have compared consumption in jurisdictions with different prices at the same points in time cross-sectional studies. Other studies make use of surveys conducted regularly among school students, adults or households.

These might be surveys that ask about smoking habits or they might be surveys about spending on a whole range of household items. In recent times, behavioural economists have examined the response of individuals not to real-life price increases, but rather to price increases simulated in behavioural experiments in laboratories.

Researchers have also used a variety of statistical models for specifying demand and for estimating elasticity. In their comprehensive review, Gallet and List 6 found that resulting estimates of price elasticity from all these sorts of studies were generally fairly similar and did not differ systematically depending on the design or method of analysis used.

Studies that measured responses to price changes in the short term tended to report lower elasticity than studies that reported long-run estimates —0. Studies published more recently and in high-quality journals also tend to report slightly lower estimates, reflecting increasing sophistication in modelling and the greater number of factors also affecting consumption being taken into account in more recent research.

Different studies have drawn differing conclusions about the relative contribution of declines in prevalence and declines in smoking intensity. Studies examining the relative effects of price on participation and smoking intensity among youth have reached varying conclusions, 9,10 but those that have used the longest panels of data 11, 12 have generally been able to detect some effect on both initiation and quitting.

Most but not all longitudinal studies from high-income countries find that smoking initiation is inversely related to price. As cigarette prices increases, smoking cessation among young people increases. Price has a direct effect on young people, and also an indirect effect through both peer and family influence.

However, teenage and younger smokers generally earn lower wages and are less dependent on tobacco, both of which would tend to make them more price sensitive.

Price Elasticity Of Demand

This finding was thrown into doubt by an influential Rand study by Wasserman and colleagues in BUS final (hard) all the "hard" questions from scribd, chapters STUDY. B. restricted tobacco advertising. Brie did not know the roles of the key players in the buying center. This could cause her to waste a lot of time and to: A.

bid too many products. All the 50 patients from both the groups were using tobacco in a smokeless form such as mawa, gutkha, tobacco, pan, etc., 5–10 packets/day.

In the study group (Group I) and control group (Group II), 23 patients were male and two patients were female.

Examining the cause of inelasticity in tobacco

Cigarette Price, Smoking, and Excise Tax Policy Kenneth E. Warner University of Michigan In , Congress converted a temporary doubling of the federal cigarette ex cise tax into a permanent tax change.

The principal motivation was the need for additional revenue. Price elasticity of demand is a measure of the percentage change in consumption associated with a 1% TABLE I. change in price [35].

The formula (1) for the average price Median national marijuana price per gram quantities less than elasticity of demand utilized in this analysis is noted below. Read chapter 2 Markets for Drugs: Despite efforts to reduce drug consumption in the United States over the past 35 years, drugs are just as cheap and avai.

All studies examining tobacco and jobs have made certain assumptions to test different ways in which governments may react to the loss in revenue from tobacco control policies that reduce consumption.

Price elasticity of demand for tobacco products - Tobacco In Australia