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EXAMINING THE DEMAND FOR VEGETABLES IN PAKISTAN: EVIDENCE FROM LINEAR APPROXIMATE ALMOST IDEAL DEMAND SYSTEM

. Muhammad Shaheryar, Shahid Ali, Irfan Ullah, Syed Attaullah Shah, Mahwish Siraj ,Harun Uçak and Naveed Ul Haq


Abstract

In agricultural economics, food demand is given top priority as food helps meet individuals’ basic needs to sustain life. Therefore, it is of paramount importance to understand consumer behavior regarding the food demand. In this paper, we estimate own price, cross price and expenditure elasticity’s of vegetables consumption in Pakistan because of their importance in daily nutrition intake of this country. To achieve the above objective, we apply linear approximate almost ideal demand system (LA-AIDS) model and latest available data from the Household Integrated Economic Survey (HIES) of Pakistan for the period 2018-19 is utilized. Total sample size in the data is 24809 households based on 1802 rural and urban primary sampling units (PSUs). The result reveals that the uncompensated and compensated own price elasticity’s for all vegetables are negative and less than unity for overall Pakistan and hence categorized as necessities. The uncompensated cross price elasticity of demand for vegetables having positive sign indicates that these are substitutes while other commodities having negative sign exhibits complementary for overall Pakistan. The compensated cross price elasticity of vegetables in overall Pakistan as well as rural and urban regions have positive signs indicating that these are substitutes. Expenditure elasticity’s of vegetables in Pakistan are positive revealing that these are regarded as normal goods. As all the estimated own price elasticity’s of vegetables are inelastic in nature so any change in the prices will result in huge expenditures on vegetables by the consumers. Therefore, price stabilization policies need to be devised to safeguard the food insecure segments of the society. Government also needs to provide income earing opportunities for enhancing the purchasing power of consumers to afford the required quantity and better quality of vegetables.

Keywords: Vegetables, Marshallian, Hessian, Expenditure Elasticity’s, LA/AIDS, Pakistan.

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