The Research about the Demand Elasticity of Tobacco Price by the Household Characteristics

Abstract

The price elasticity of tobacco was presumed by using family expenditure survey data during the year 1985–2007. SUR method was applied by using LA / AIDS model, and tobacco price elasticity came out by the household characteristics. The tobacco price elasticity by the household characteristics showed up differently. In the price elasticity estimation result by the household characteristic, various price elasticity are estimated by the income level, education level of householder, and the householder age level. In the income level case’s conclusion, the price is not sensitive factor for persons in the high income level because the share of tobacco expenditure in the total consumption expenditure is lower for the higher-income household. In average, the price elasticity of smoking household is -0.81. This value is higher than the previous national price elasticity, and that means consumers are more sensitive to consider the tobacco price than past time. In addition, this study is meaningful for providing useful evidence for the effective tobacco taxes increasing strategy in the future.