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Price elasticity of demand for cigarettes: The Case of Sweden
Dalarna University, School of Technology and Business Studies, Economics.
Dalarna University, School of Technology and Business Studies, Economics.
2014 (English)Independent thesis Advanced level (degree of Master (One Year)), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

Due to health problems and the negative externalities associated with cigarette consumption, many governments try to discourage cigarette consumption by increasing its price through taxation. However, cigarette, like the other addictive goods, is viewed as that it is not sensitive to demand rules and the market forces. This study analyses the effect of price increase on cigarette consumption. We used Swedish time series data from 1970 to 2010.

Our results reveal that though cigarette is addictive substance its demand is sensitive to changes in the price. Estimates from this study indicate short-run price-elasticity of -0.29 and the long run price elasticity of -0.47.

Place, publisher, year, edition, pages
Keyword [en]
Price elasticity, Cigarette demand, Tobacco, Sweden, Rational addiction, Myopic addiction
National Category
URN: urn:nbn:se:du-14649OAI: diva2:732301
Available from: 2014-07-30 Created: 2014-07-03 Last updated: 2014-10-29Bibliographically approved

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