Estimating price and income elasticity of demand

The responsiveness of tobacco consumption to price and income increases is measured by the price and income elasticity of demand respectively. Policy makers are interested in learning about the price sensitivity of tobacco consumption with a view to predicting the possible impact of tobacco tax increase that causes tobacco price to
increase leading to decrease in tobacco consumption. This presentation elaborates the methods of estimating price and income elasticity of demand including selection of demand model, data requirement, specification of functional form and the estimation issues.

 

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WHO