The Becker-Murphy model also predicts that the short-term price elasticity, which holds past consumption constant, must be smaller in absolute value than the long-term price elasticity, which allows past consumption to vary.4 For example, a price increase in 2001 according to the model would reduce consumption in 2001, with consumption in previous years held constant. Because of the addictive nature of alcohol, the model also predicts that consumption in 2002 and in all future years also would fall. Consequently, the reduction in consumption observed over several years (i.e., in the long term) after the price increase would exceed the reduction observed in 2001 (i.e., in the short term).
