Price Elasticity of Demand for Cigarette Items: Evidence from South Kalimantan Province of Indonesia

Abstract

Smoking can affect health conditions that can lead to many adverse impacts in a wider scope. The government of Indonesia has applied some excise tax regulations on tobacco products to control the consumption of cigarette items. With very limited studies in Indonesia about the price elasticity of demand for tobacco products, this paper aims to fill the gaps in the demand for cigarette items in Indonesia. By using a new approach to calculate the price elasticity of demands which is AIDS and QUAIDS with the ILLS approach, this paper found significant findings. It is found that only the filtered clove cigarettes that inelastic to the price increases. The government should carefully apply the excise tax regulation based on the cigarette items.