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...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2013
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2013/01/18136337/economic-analysis-tobacco-demand http://hdl.handle.net/10986/16269 |
| Summary: | 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. |
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