Taken together, these findings on the relationship between price and demand for alcohol have important implications for policies aimed at curbing alcohol use and abuse among youths and young adults. First, this research demonstrates that increases in the price of alcoholic beverages, which could be achieved by raising alcohol taxes, effectively can reduce drinking and heavy drinking. Second, the results demonstrate that the long-run price elasticity of demand when accounting for the addictive aspects of drinking is well above both the short-run elasticity and the elasticity obtained when ignoring addictive aspects. This finding implies that previous estimates of the effects of tax increases on alcohol use among youths and young adults and its consequences significantly understate the benefits of higher taxes. Third, the finding that young adults are farsighted in terms of future alcohol consumption implies that policies that raise the perceived future costs of alcohol use and abuse can significantly reduce current drinking.
