Substance use among adolescent students with consideration of budget constraints

This paper estimates the demand for cigarettes, alcohol, and marijuana with consideration of the other goods that might exist in a teenager’s utility function. Youth tend to have small incomes and limited wants, with the result that many students spend the bulk of their income on only a few items such as fast food, clothing, and entertainment. In this paper, we examine the influence of changes in the prices of goods commonly bought by teenagers on the demand for cigarettes, alcohol, and marijuana. We estimate own and cross price effects using the prices of the illicit substances and other consumer products including gasoline, clothing, entertainment, and fast food. Income effects are also estimated and show that teens with higher incomes and allowances are more likely to use substances. The implications of higher excise taxes on different products are discussed.