EstimatingPriceElasticitiesofDemandforAlcoholand.docxVIP

Estimating Price Elasticities of Demand for Alcohol and Tobacco In The UKJames CollisMagdalena CzubekSurjinder Johal27 May 2010 AbstractUK duties on alcohol and tobacco generated almost ￡18 billion in exchequer revenues in 2009-10. HM Revenue Customs use own-price and cross-price elasticities to analyse the effect of duty rate changes upon exchequer revenues. A duty rate increase will have two opposing effects on tax revenues: increase revenues by levying more duty per unit sold, but also reducing consumption through the resulting higher prices as consumers substitute away to other products,