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Elasticity of demand pdf


elasticity of demand pdf

Townsend and colleagues (1994) found that women in the late 1980s and early 1990s in Britain were more sensitive than men to increases in tobacco prices.
The relationship between price and quantity demanded is measured by 'price elasticity of demand' (PED).
Some studies have compared consumption in the same jurisdiction with different prices over time (time-series analyses).Some have measured the weight of product sold, others the number of units.If price elasticity of demand for a good were about.0, then demand for that good would fall by 1 for every 1 increase in price.Any change in price in only half the proportional effect on sales.In some cases, it has a natural interpretation as the proportion of people buying product j who would consider product i their "second choice".6 The most recent review of literature on the effect of prices on youth smoking conducted by the International Agency for Research on Cancer 9 concluded that price elasticity of demand for teenagers was somewhere between.5 and.2.Figure: External cost from manufacturing.It asserts that even addicted individuals do take into account future costs.Weekly sales drop only from 1,000 to 900 bottles.Where there are few if any alternatives, price is usually inelastic.Chaloupka and Pacula, 22 however, found that the prevalence elasticity for young American men was almost twice as large as that for young women.
If the price of one good changes, there will be no change in demand for the other good.
Some of these studies have analysed changes in taxable or reported sales of all tobacco products, and some have looked at cigarettes alone.
Price elasticity data is very useful in making pricing decisions.
Proponents of imperfectly rational addiction models hypothesise that consumption will fall sharply in response to price increases, but will then drift back again with time.When you reduce the price of most items, people will buy more of them.Studies that measure the weight of product may not sufficiently account for tobacco companies gradually reducing the taxable weight of cigarettes (without corresponding decreases in delivery of toxins).Nevertheless, the choice an individual makes will take all relevant factors into account and be a rational one.The reliability of individual-level data is very much dependent audio to midi realtime on adequate sampling and recall and honesty by respondents about factors such as purchase of illicit tobacco products.


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