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Examining Fruit Demand Elasticities In Pakistan

Author

Listed:
  • Iqbal Sarah

    (Department of Agriculture & Applied Economics, the University of Agriculture, Peshawar, Pakistan)

  • Fayaz Muhammad

    (Department of Agriculture & Applied Economics, the University of Agriculture, Peshawar, Pakistan)

  • Ullah Irfan

    (Department of Agriculture & Applied Economics, the University of Agriculture, Peshawar, Pakistan)

  • Uçak Harun

    (Alanya Alaaddin Keykubat University, Turkey)

  • Shah Syed Attaullah

    (Department of Agriculture & Applied Economics, the University of Agriculture, Peshawar, Pakistan)

  • Sayam Farheen

    (Lahore University of Management Sciences, Suleman Dawood School of Business, Pakistan)

Abstract

Research background Income and prices are important factors that determine and decide households consumption decisions and behavior. Purpose and research methodology This paper aims to examine fruits’ demand elasticities in Pakistan by using the Linear Approximate Almost Ideal Demand System (LA/AIDS). For this purpose, data from the Household Integrated Economic Survey (HIES) 2018–2019 part of Pakistan Living Standard and Measurement is used for the selected fruits. Results Marshallian, Hicksian, and expenditures elasticities were calculated through the estimated parameter from the Linear Approximate Almost Ideal demand system. The results show that all the estimated expenditure elasticities of the selected fruits for Pakistan are positive. The magnitude of expenditure elasticities for bananas, malta, apple, grapes, watermelon, plum, and almonds, is less than unity, and are thus categorized as normal food items. The estimated uncompensated own price demand elasticities for all fruits are less than unity (inelastic) for Pakistan and thus categorized as necessities. Based on the cross-price uncompensated demand elasticities eighteen fruits are reported as gross complements and three fruits are gross substitutes. Most of the fruits are categorized as neutral fruits having no cross-price effect on each other’s demand as their estimated elasticities are closer to zero. Only apples with grapes and almonds are found to be notable substitutes. As most of the price elasticities of fruits are inelastic, any change in their price would result in a massive increase in expenditure on these fruits. As a result, the government may adopt policies for the stabilization of fruit prices to meet the minimal daily food requirements of the lower segments of society. Novelty This study is an attempt to estimate demand elasticities for individual fruit as very little research is available in the study area for individual commodities.

Suggested Citation

  • Iqbal Sarah & Fayaz Muhammad & Ullah Irfan & Uçak Harun & Shah Syed Attaullah & Sayam Farheen, 2023. "Examining Fruit Demand Elasticities In Pakistan," Folia Oeconomica Stetinensia, Sciendo, vol. 23(2), pages 150-168, December.
    • Handle: RePEc:vrs:foeste:v:23:y:2023:i:2:p:150-168:n:3
    DOI: 10.2478/foli-2023-0024
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    References listed on IDEAS

    as
    1. Adolf Buse, 1994. "Evaluating the Linearized Almost Ideal Demand System," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 76(4), pages 781-793.
    2. Lubna Naz & Munir Ahmad & G.M Arif, 2018. "Estimating Food Demand System and Rural Household Welfare: A Case study from Pakistan," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 10(4), pages 55-82, December.
    3. Frank Asche & Cathy R. Wessells, 1997. "On Price Indices in the Almost Ideal Demand System," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(4), pages 1182-1185.
    4. Alston, Julian M & Foster, Kenneth A & Green, Richard D, 1994. "Estimating Elasticities with the Linear Approximate Almost Ideal Demand System: Some Monte Carlo Results," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 351-356, May.
    5. Giancarlo Moschini, 1995. "Units of Measurement and the Stone Index in Demand System Estimation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(1), pages 63-68.
    6. Brown, Mark G. & Lee, Jonq-Ying, 2002. "Restrictions on the Effects of Preference Variables in the Rotterdam Model," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 34(1), pages 17-26, April.
    7. Biing-Hwan Lin & Steven T. Yen & Chung L. Huang & Travis A. Smith, 2009. "U.S. Demand for Organic and Conventional Fresh Fruits: The Roles of Income and Price," Sustainability, MDPI, vol. 1(3), pages 1-15, August.
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    More about this item

    Keywords

    fruits; LA/AIDS; Expenditures elasticities; Marshallian elasticities; Hicksian elasticities; Pakistan;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market
    • Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices

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