Ana Mugoša , Mirjana Čizmović, Tanja Laković, Milenko Popović
Abstract: The main goal of this research is to estimate the price elasticity of cigarette demand in Montenegro, applying Micro analysis. The data related to cigarettes consumption was derived from the Household Budget Survey (HBS), covering the period from 2006-2017. The long-run and short-run elasticities of cigarette demand, in context of price and income were estimated using Deaton’s model. Results of the estimation indicate a negative price elasticity of cigarettes, while the value of total expenditure elasticity is positive (which was expected). The analysis of the tobacco market and regulatory shows that the increase in excise taxes will have direct positive effect – decrease in quantity of cigarettes demanded. The results are in line with the previously conducted research in low and middle-income countries.
Keywords: price and income elasticity of cigarette demand; HBS; excise taxes; Montenegro