An Analysis Of Alcohol And Tobacco Demand In Ireland Using The AIDS And QUAIDS Models

This paper analyzes the demand for alcohol and tobacco in Ireland,using the period 2002 to 2015.The Almost Ideal Demand System(AIDS)and an extended version of the model,The Quadratic Almost Ideal Demand System(QUAIDS)is used in order to estimate own price and cross price elasticities.The results show that wine and tobacco are inelastic and that beer and spirits are elastic.Cross price elasticities show that spirits are complementary to wine,beer and tobacco,and the latter three are substitutes for spirits.Wine and beer are substitutes for tobacco,whereas spirits are complementary to tobacco.This application of the AIDS and QUAIDS model to alcohol and tobacco demand is of particular interest to not only the drinks and tobacco industries in Ireland but also to the government in creating efficient non-contradictory policies to curtail the negative side-effects of the two.