Statistical analysis of prices and alcohol consumption over time provides evidence of
the effect of prices on the population level of alcohol consumption. Increases in price reduce
alcohol consumption but estimates of the size of the effect vary considerably. Price effects
are measured in terms of the price elasticity, which relates the change in consumption to the
size of the price increase. Thus, a price elasticity of –1.0 implies that a 1% increase in price
will produce a 1% reduction in consumption. If the absolute size of the price elasticity is less
than 1 then any price increase will produce a less than proportional reduction in consumption.
Table 4.1 summarises the available information on price elasticities. The upper part of the
table gives the number of studies that have reported results in the ranges specified and the
lower part of the table gives UK Treasury estimates used to forecast tax revenue.