Economics of Tobacco Toolkit, Tool 3 : Economic Analysis of Tobacco Demand

The tobacco epidemic is a worldwide phenomenon with significantly destructive effects on developing, transitional, and industrialized nations. The first scientific evidence on the health consequences of tobacco consumption-specifically, smoking-was discovered in industrialized nations. As a result, the economic analysis of tobacco control issues began and was developed in these countries. This tool attempts to explain the process of analysis of demand for tobacco products as simply as possible. It includes discussions of basic economic and analysis principles (written for non-specialists such as policy makers and analysts) and more advanced technical points (intended for use by the economists and econometricians who will undertake the actual demand analysis). Consumption of tobacco products includes both smoked categories (e.g., cigarettes, hand-rolled tobacco, pipe tobacco, cigars, bidis, kreteks, etc.) and smokeless types (such as snuff and chewing tobacco). In industrialized countries, cigarettes disproportionately influence tobacco epidemics. This tool discusses and presents, in technical detail, each of the steps necessary to conduct an economic demand analysis on tobacco products. In addition, the reader is presented the fundamentals of demand analysis, including its purpose, assumptions, and requirements. In turn, the reasons to intervene in the market for tobacco products stem from the destructive nature of tobacco consumption. Smoking is the single largest preventable cause of premature death in industrialized countries. In economic terms, the principle of consumer sovereignty holds that individuals know what products are in their best interests to consume. Provided consumers know the risks concerned and internalize all the costs and benefits involved, private consumption decisions result in the most efficient allocation of society's scarce resources. Tobacco products are available to consumers for a price, and an issue of great interest to tobacco control advocates (and the tobacco industry) is to what extent are consumers willing to buy those tobacco products. For instance, the willingness to buy is strongly influenced by such characteristics as the consumer's sense of value, income level, and taste.

Bibliographic Details

Main Authors:	Wilkins, Nick, Yurekli, Ayda, Hu, Teh-wei
Language:	English en_US
Published:	World Bank, Washington, DC 2013
Subjects:	AD VALOREM, ADDICTION, ADDICTION TO NICOTINE, ADDICTIVE NATURE, ADDICTIVE NATURE OF TOBACCO, ADDICTIVE SUBSTANCES, ADVERTISING BANS, ADVERTISING CAMPAIGNS, AGGREGATE DEMAND, ANNUAL CIGARETTE CONSUMPTION, ARBITRAGE, AVERAGE PRICE, BIDIS, CHEWING TOBACCO, CIGARETTE, CIGARETTE ADVERTISEMENTS, CIGARETTE ADVERTISING, CIGARETTE BRANDS, CIGARETTE CONSUMPTION, CIGARETTE CONSUMPTION DATA, CIGARETTE DEMAND, CIGARETTE MANUFACTURERS, CIGARETTE PRICE, CIGARETTE SALES, CIGARETTE SMOKING, CIGARETTE SMUGGLING, CIGARETTE TAX, CIGARETTES, CIGARS, COMPETITIVE MARKETS, CONSUMER PRICE, CONSUMER PRICE INDEX, CONSUMER SOVEREIGNTY, CONSUMER SURPLUS, CONSUMERS, CONSUMPTION OF TOBACCO, COUPONS, DEMAND ANALYSES, DEMAND ANALYSIS, DEMAND CURVE, DEMAND FOR TOBACCO PRODUCTS, DEMAND FUNCTION, DEMAND FUNCTIONS, DISPOSABLE INCOME, DOMESTIC TOBACCO, ECONOMETRIC ANALYSES, ECONOMETRIC ANALYSIS, ECONOMETRIC MODELS, ECONOMETRICS, ECONOMIC ANALYSIS, ECONOMIC DEMAND, ECONOMIC THEORY, ENVIRONMENTAL TOBACCO SMOKE, EXCISE TAXES, EXOGENOUS VARIABLES, EXPENDITURE, EXPENDITURES, EXTERNALITIES, FUNCTIONAL FORMS, GLOBAL TOBACCO EPIDEMIC, HEALTH RISKS OF SMOKING, MARIJUANA, MARKET FAILURES, MARKET RESEARCH, MARKET SHARE, MARKETING, NICOTINE, NICOTINE ADDICTION, NICOTINE CONTENT, NICOTINE DELIVERY, NICOTINE REPLACEMENT, NICOTINE REPLACEMENT THERAPY, PASSIVE SMOKING, PER CAPITA CONSUMPTION, PIPE TOBACCO, POLITICAL ECONOMY, POTENTIAL SMOKERS, PRICE DIFFERENTIALS, PRICE ELASTICITY, PRICE ELASTICITY OF DEMAND, PRICE OF CIGARETTES, PRICE OF TOBACCO, PRICE VARIATION, PRODUCT MARKET, PRODUCTION COSTS, PUBLIC PLACES, QUANTITY OF CIGARETTES, QUITTING SMOKING, REGRESSION ANALYSIS, RESTRICTIONS ON SMOKING, RETAIL, RETAIL PRICE, RETAIL PRICES, SHORT-RUN PRICE ELASTICITY, SMOKED TOBACCO, SMOKELESS TOBACCO, SMOKER, SMOKERS, SMOKING, SMOKING CESSATION, SMOKING CESSATION PROGRAMS, SMOKING IN PUBLIC, SMOKING RESTRICTIONS, SMOKING TOBACCO, SNUFF, SPREAD, STRUCTURAL CHANGE, SUBSTITUTE, SUBSTITUTES, SURPLUS, TOBACCO, TOBACCO ADVERTISING, TOBACCO COMPANIES, TOBACCO CONSUMPTION, TOBACCO CONTROL, TOBACCO CONTROL INITIATIVES, TOBACCO CONTROL ISSUES, TOBACCO CONTROL POLICY, TOBACCO DEMAND, TOBACCO EPIDEMIC, TOBACCO EPIDEMICS, TOBACCO INDUSTRY, TOBACCO ISSUES, TOBACCO MARKET, TOBACCO PRODUCT SALES, TOBACCO USE, TOBACCO-RELATED DISEASE, TOBACCO-RELATED ILLNESS, WARNING LABELS, WHOLESALE PRICE, WHOLESALE PRICES, WHOLESALE TRADE, WHOLESALERS,
Online Access:	http://documents.worldbank.org/curated/en/2013/01/18136337/economic-analysis-tobacco-demand https://hdl.handle.net/10986/16269
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