ABSTRACT
In Chapter 3, we presented an overview of tobacco consumption around the world. In Chapter 8, we analysed the demand for tobacco, using a system-wide framework, using data from 43 developed and developing countries. We analysed tobacco consumption in the context of consumer utility maximizing framework and found that income and prices are the two major economic factors that significantly influence tobacco consumption, in most countries. In a majority of the countries, tobacco is considered as a necessity by consumers. We also found that demand for tobacco is price inelastic. The cross-country averages of income and own-price elasticities of tobacco are 0.83 and -0.46 (see Table 8.15), respectively. These elasticity estimates mean that if income increases by 10 percent then the consumption of tobacco will increase by 8.3 percent and if the price of tobacco increases by 10 percent then tobacco consumption would fall by 4.6 percent. We also estimated the price elasticities of tobacco separately for the two groups of countries, developed and developing countries, and found that a 10 percent increase in price of tobacco would reduce the demand for tobacco by 4.2 percent in developed countries and 5.2 percent in developing countries.
