Ideal Demand System Research Articles

Modelling the Demand for Indonesia’s Foreign Reserves

Abstract The foreign reserves sufficiency is important to maintain macroeconomic stability. The main objective of this paper is to model the behaviour of the central bank in accumulating the foreign reserves in the case of Indonesia. Unlike the previous empirical studies, this paper disaggregates the components of foreign reserves into foreign currency, securities, gold, and special drawing rights. This paper relies on the Almost Ideal Demand System combined with the Error Correction Model. The estimation result for monthly data over the period 2010(1)-2020(12) reveals that the own-price coefficients are negative and statistically significant which is consistent with the standard theory of demand. While the foreign currency-securities pairwise is substitutive, the foreign currency-gold and the foreign currency-special drawing rights pairwise are complementary or even independent. However, the wealth effect is inelastic except for securities reserves. These results imply that the central bank of Indonesia can re-balance its reserves. The securities holding which have the highest proportion of foreign reserve scan be switched to foreign currency, gold, and/or special drawing rights. The rebalancing measures would remain having an optimal level of foreign reserves holding in terms of its opportunity cost. Therefore, the monetary authority can conduct a further macroeconomic stabilisation without substantially losing the returns.

Land competition and welfare effects from Mexico's proposal to ban genetically engineered corn

AbstractSince joining the North American Free Trade Agreement, Mexico has increased its meat production and exports and become more dependent on imported feedstuffs such as genetically engineered (GE) corn. Mexico recently banned the use of GE corn in corn‐based foods and called for a gradual substitution away from the use of GE corn for other uses (e.g., feed). This paper considers how a complete ban on GE corn might affect Mexican households using a computable general equilibrium (CGE) model to simulate the impact over the medium run (5 years). Results indicate that Mexico decreases corn imports by 76.9% and increases corn production by 65.6%—an increase that would require 3.3 million hectares more land for corn. The policy leads to a 24.8% increase in Mexico's corn price and up to a 6% increase in the prices of other agricultural products. But Mexico might have difficulty shifting land to corn; as such, we consider an alternative scenario that restricts land movements. We find that impacts are further exacerbated in this scenario—for example, corn prices triple. Our final contribution is to pair these results with a compensating variation calculation based on the almost ideal demand system. We find that Mexican households would need to spend, on average, between 6.7 and 13.9% more on food, depending on the scenario, to compensate for the resulting price escalations. Ultimately, our results show that a move toward greater food sovereignty in Mexico is ultimately borne by consumers via higher food prices.

Can we design food taxes to reduce agricultural greenhouse gas emissions in China? A perspective from animal protein intake of low-income populations

PurposeStudies on developed economies showed that imposing taxes on animal-based foods could effectively reduce agricultural greenhouse gas emissions (AGHGEs), while this taxation may not be appropriate in developing countries due to the complex nutritional status across income classes. Hence, this study aims to explore optimal tax rate levels considering both emission reduction and nutrient intake, and examine the heterogenous effects of taxation across various income classes in urban and rural China.Design/methodology/approachThe authors estimated the Quadratic Almost Ideal Demand System model to calculate the price elasticities for eight food groups, and performed three simulations to explore the relative optimal tax regions via the relationships between effective animal protein intake loss and AGHGE reduction by taxes.FindingsThe results showed that the optimal tax rate bands can be found, depending on the reference levels of animal protein intake. Designing taxes on beef, mutton and pork could be a preliminary option for reducing AGHGEs in China, but subsidy policy should be designed for low-income populations at the same time. Generally, urban residents have more potential to reduce AGHGEs than rural residents, and higher income classes reduce more AGHGEs than lower income classes.Originality/valueThis study fills the gap in the literature by developing the methods to design taxes on animal-based foods from the perspectives of both nutrient intake and emission reduction. This methodology can also be applied to analyze food taxes and GHGE issues in other developing countries.

Changes in the structure of household expenditure in urban and rural China

ABSTRACT In the last two decades, China has witnessed a remarkable change in household expenditure structure following the rapid growth of household income. Using provincial-level panel data from 2001 to 2019 and the Quadratic Almost Ideal Demand System model, we derive the expenditure elasticities, as well as uncompensated and compensated price elasticities, for urban and rural households. Our results suggest that food and clothing are ‘necessity’ goods, whereas residence, education, and transportation are ‘luxury’ goods for both urban and rural households. Household facilities and medical services are necessities for urban households, while they are luxuries for rural households. All own-price elasticity estimates are negative, indicating that no Giffen goods exist. We also observe temporal changes in the household expenditure structure over China’s Five-Year Plan cycles. Finally, we find significant differences in the own-price elasticity across the eastern, central, and western regions with varying levels of economic development.

Impacts of Habit Formation Effect on Food Consumption and Nutrient Intake in Rural China.

This study employs panel data and a dynamic Almost Ideal Demand System (AIDS) model to investigate the habit formation effect of food consumption among Chinese rural residents and its consequential impact on nutritional intake. The dataset, spanning from 2012 to 2018, encompasses nine provinces in China and involves 5390 rural households. The findings reveal that, excluding beef, mutton, and poultry, there are significant habit formation effect on the consumption of food categories, notably grains, vegetables, and edible oils. Lower-income and younger demographics demonstrate a more pronounced reliance on established dietary habits. Influenced by the habit formation effect, there is a substantial reduction in the income elasticity differences across various food types. Overlooking the habit formation effect in food consumption would lead to an underestimation of the income elasticity of energy, fat, and carbohydrates. This suggests that, over the long term, food consumption habit formation is a pivotal factor in enabling the enhancement of residents' dietary structures, amplifying the incremental energy intake associated with income increases, and accelerating the transition towards nutritional surplus. The conclusions drawn from this study offer valuable insights for ensuring food security and nutritional balance. Policy-makers of food and nutrition strategies should duly consider the habit formation effect on residents' food consumption, and seek to optimize dietary patterns and promote nutritional transformation by food consumption habit intervention.

The Nutritional Implications of High Wheat Prices on Agriculture Households in Pakistan

This study analyzes the potential repercussions of high wheat prices on agriculture household economic and nutritional well-being in Pakistan. This task was accomplished by formulating a theoretical model to capture the economic behavior of agricultural households that produce marketable surpluses of wheat. For empirical verification, eight modules of nationally representative Household Integrated Economic Survey (HIES) were combined with approximate price levels to create a pooled cross-sectional sample of annual price-indices for household expenditure from 2000-01 to 2018-19. The study uses the Linear Approximate of Almost Ideal Demand System (LA-AIDS) model to derive demand elasticities and conduct a comparative static analysis. Finally, the model is extended to assess household nutritional well-being by linking price effects to calorie intake. The empirical findings demonstrated that high wheat prices resulted in high farm revenues for agricultural households. Although wheat consumption has declined, these households have used excess profits to diversify the food basket, which in turn led to an improvement in calorie intake. An indirect spillover effect from changes in wheat prices has also been observed, leading to an increase in demand for domestically produced commodities. Since the overall impact of wheat price increase on agricultural and non-agricultural households is mixed, it is proposed to pursue a careful food security policy to ensure the economic and nutritional well-being of the entire society. This study adopts a two-pronged approach of social to integrating social safety nets that does not hinder agricultural growth to achieve a mutually rewarding outcome.

Dynamic analysis of Caribbean food import demand

Short- and long-run price and income elasticities are generally unavailable at the regional level for major imported food groups for the Caribbean. These elasticity measures are needed to enhance policymaking. This paper therefore seeks to determine the income, own-price and cross-price elasticities of eight major imported food groups. This will show the relationships between income and price changes on the import quantities for the major food groups. This was done using an error-corrected linear approximate almost ideal demand system (EC-LA-AIDS) for the period 1961–2021, using annual data. The study found that the theoretical restrictions of homogeneity and symmetry did not hold in the static LA-AIDS model but did in the EC-LA-AIDS model. The speed of adjustment parameter in the EC-LA-AIDS model revealed that imported beverages had the slowest adjustment to long-run equilibrium while all other imported food categories had a moderate adjustment speed. The study also derived short- and long-run income and price elasticities of import demand for the eight imported food categories. In both time horizons, income elasticities revealed that all imported food categories were normal goods. In both time horizons, imported meat and seafood, and sugar and honey were the most responsive to changes in income, while spices and tea was the least responsive. Own-price elasticities revealed that all imported food categories were import price inelastic except for meat and seafood which was found to be import price elastic in both time horizons. Additionally, cross-price elasticities unveiled various substitution and complementary relationships between pairs of imported foods. The study not only contributed empirical insights into the import demand dynamics of the Caribbean, but also emphasized significant policy implications arising from the research findings.

Off-premises demand elasticities for pure alcohol in five Latin American countries: The case of Argentina, Chile, Costa Rica, Honduras, and Uruguay

Background and AimsThere is ample evidence from high-income countries that fiscal policies such as alcohol taxes can affect the consumption of alcohol by increasing alcohol prices. In the case of Latin American countries, much less is known about how sensitive alcohol demand is to alcohol price changes. This study aims to expand the evidence base on the sensitivity of off-premises pure alcohol demand to price and expenditure increases in five Latin American countries: Argentina, Chile, Costa Rica, Honduras, and Uruguay, which have different socioeconomic profiles and alcohol consumption patterns. Design and settingCross-sectional study MeasurementsThe price and expenditure elasticities were estimated using an Almost Ideal Demand System (AIDS). Own price and expenditure elasticities for off-premises pure alcohol were estimated using representative household surveys, which collect data on households' expenses to construct the consumer basket of goods and services used to calculate the consumer price index (CPI) for the country. FindingsOwn price elasticities of off-premises pure alcohol for all countries were negative, inelastic, and significant at 1 %. They were -0.418 for Argentina; -0.656 for Chile; and for Costa Rica, Honduras, and Uruguay, they were equal to -0.608, -0.509, and -0.32, respectively. Expenditure elasticities were positive and significant at 1 %, except for Costa Rica, which was significant at 10 %. They were equal to 0.865 in Argentina; 0.943 in Chile; 1.182 in Costa Rica; 0.874 in Honduras; and 0.857 in Uruguay. Elasticities for Costa Rica should be interpreted cautiously, as there is insufficient geographical price variability to identify the demand correctly. ConclusionsResults were consistent with previous literature for countries from other regions. Governments should expand this study to measure total demand elasticities to improve the design of alcohol tax policies.

Food Demand Projection and Consumption Patterns of Urban Households in Nigeria’s Kano State

Changes in population and income are essential components for altering the pattern of food demand. In light of the importance of food demand analysis, this study set out to ascertain urban household consumption trends in Nigeria’s Kano State in order to forecast future demand levels for certain food items. This research contributes to becoming a basis for policymakers to increase food productivity. A household’s cross-sectional survey data elicited through a well-structured questionnaire complemented with an interview schedule from a total of 144 households chosen via a multi-stage sampling procedure was used for the study. The collected data were analyzed using both Linear Approximate/ Almost Ideal Demand System (LA/AIDS) and factor analysis models. Based on empirical evidence, households’ poor purchasing power is owed to high food inflation, which causes them to have low dietary diversity. Besides, the necessary and luxury goods, respectively, were rice, beans, spaghetti, and meat; and millet, yam, Irish potatoes, semovita, fish and groundnut. Meanwhile, maze, garri, and palm oil were established to be inferior commodities. Besides rice and semovita being everyday goods, they demand high price-sensitive commodities. Consequently, to maintain the status quo in the households’ welfare, the onus lies on policymakers to compensate consumers if there is a rise in the prices of local rice, indomie and groundnut oil. The study advises policymakers to increase the productivity of those food items projected to witness the steep-to-gentle rise in demand, and government should endeavour to adopt macro-economic policies with human-face so as to cushion/soften households’ economic hardship in the study area.

Tobacco price elasticity by socioeconomic characteristics in Ecuador.

Smoking is a worldwide epidemic and increased prices are one of the most cost-effective measures to reduce tobacco consumption. This article aims to estimate the price and income elasticity of cigarettes for different population groups in Ecuador. The National Survey of Urban and Rural Household Income and Expenditures (ENIGHUR) 2011-2012 was used, which has information on household cigarette consumption and its sociodemographic characteristics. Deaton's Almost Ideal Demand System, which decouples the effect of quality on the price of the good, was applied. The elasticities were calculated for several groups: urban/rural, income levels (tertiles), education level, sex and age ranges of the household head, and frequency of cigarette purchases in households. The estimated price elasticity nationwide is -0.89 and the income elasticity is 0.41, both statistically significant. Households headed by women (-2.22) are more sensitive to an increase in cigarette prices than those headed by men (-0.65) and households headed by people between 20 and 40 years of age (-2.32) have a higher price elasticity compared to country-level estimations. Differences within other groups are not statistically significant.

Household Demand Analyses in Uyo Metropolis: A Study of Selected Determinants Responsiveness

The study is an attempt to evaluate household demand analyses in Uyo metropolis: a study of selected determinants responsiveness. The research employed survey data obtained from 200 households via individual interviews utilizing a meticulously designed questionnaire. Information on income, age, sex of household head, household size, educational background was collected to capture household demography. The data were also collected on household expenditure on the selected food and nonfood item, their respective prices and the quantity consumed in a given month. The study adopted the quadratic almost ideal demand system (QUAIDS) as a model. The result indicated that factors that affect household food expenditure on Rice, Beans and Garri are the prices of the goods, income, household size, level of education and the prices of other goods. Similarly, the study found negative compensated and uncompensated own price elasticity of demand for the food items rice, beans and garri while beer has a positive own price effect. All the goods were found to be price inelastic as their own price elasticity lies between -1 and 1. Again, all food items were found to have negative cross price elasticity and which is less than one indicating that they are substitutes and price inelastic. On the other hand, the study found evidence of complementary relationship between beer and food items like garri and beans. The study recommends that the government subsidize food prices, lower taxes on these goods, provide cash transfers to the poor, or promote the production of these food items by giving preference to farmers who produce them in order to lessen the impact of such price increases on the demand for these commodities.

An Almost Ideal Demand System approach in analysing demand for Indonesian imported rice

An Almost Ideal Demand System approach in analysing demand for Indonesian imported rice

Estimating an almost ideal demand system for red meat consumption in Libya Throughout the Year 2021 (A Case Study of the Municipality of Hay Al-Andalus)

استهدفت الدراسة بشكل أساسي تقدير دالة الطلب على استهلاك اللحوم الحمراء في بلدية حي الأندلس خلال العام 2021 باستخدام نموذج الطلب شبه الأمثل(AIDS)، لشرح سلوك المستهلك وذلك من خلال أسلوب معادلات الانحدار غير المرتبطة ظاهريا (SURE)، هذا وقد تم الاعتماد في الحصول على البيانات من المصادر الأولية المتمثلة في استمارة استبانة، ومن خلال فرض قيود الإضافة والتجانس والتماثل والسالبية، وأظهرت نتائج نموذج (AIDS) ارتفاع نسبة إنفاق المستهلك على اللحوم حيث بلغت النسبة الأكبر للحوم الأغنام 31%، وهذا يعني تفضيل المستهلك الليبي لهذه السلعة للحصول على احتياجاته الغذائية من البروتين الحيواني،، بينما بلغت للحوم الأبقار والإبل والدواجن والأسماك على التوالي (18%،8%، %28، 15%)، وأشارت نتائج مرونة الطلب السعرية على لحوم الأغنام، والأبقار، والإبل، والدواجن، والأسماك غير مرنة وذلك من خلال القيم المتحصل (-0.03،-0.01،-0.51،-0.08، -0.06) على التوالي، وعلاقة تكاملية بين لحوم الأغنام ولحوم الأبقار والإبل والدواجن والأسماك وفقًا للمرونات الطلب التقاطعية، وأخيرا أظهرت المرونة الإنفاقية أن لحوم كلا من الأغنام والأبقار والإبل والدواجن تعتبر سلعا ضرورية من خلال القيم المتحصل عليها (0.39،0.95،0.45،0.71) على التوالي، وان لحوم الأسماك سلعة كمالية إذ قدرت ب2.71، وأوصت الدراسة التوسع في الإنتاج المحلي من اللحوم الحمراء من خلال زيادة الاستثمار في الإنتاج الحيواني والاهتمام بزيادة الإنتاج من لحوم كل من الدواجن نظرا لانخفاض سعرها مقارنة بأسعار اللحوم الحمراء والأسماك حتى تكون في متناول ذوي الدخول المنخفضة.

Analyzing Meat and Seafood Import Demand in Trinidad and Tobago Using the Linear Approximate Almost Ideal Demand System Model

A linear approximated almost ideal demand system model is specified to estimate imported meat and seafood demand in Trinidad and Tobago for the period 1976 to 2019 using annual data. Model parameters were estimated using seemingly unrelated regression with theoretical restrictions imposed. The results found that own-price of imported poultry and seafood negatively affected import expenditure share while own-price positively affected import expenditure share for imported beef, pork, and mutton. In addition, income negatively affected the import expenditure share of imported beef but positively affected the import expenditure share of imported pork, poultry, seafood, and mutton over the study period. Expenditure elasticity for imported meats and seafood reveals that they are all normal goods. Imported beef, pork, poultry, seafood, and mutton had expenditure elasticities of 0.57, 1.13, 1.94, 1.12, and 1.05, respectively. Imported pork, poultry, seafood, and mutton were found to be luxuries with income-elastic import demand. Own-price elasticities reveal that imported poultry was the most import elastic with an own-price elasticity of 1.40, followed by imported seafood (1.22), beef (0.65), mutton (0.54), and pork (0.48). Cross-price elasticities revealed that various complementary and substitution relationships existed among imported meats and seafood over the study period. Hicksian cross-price elasticities showed that mostly substitution relationships existed between various pairs of imported meats and seafood. The study also highlighted some policy recommendations that can be derived from the results.

Taxing sugar sweetened beverages in Indonesia: Projections of demand change and fiscal revenue.

The global trend of diets high in sugar sweetened beverages (SSB) is associated with a high risk of obesity and non-communicable diseases (NCDs). To reduce SSB consumption on a population level, SSB taxes have become a popular policy solution. In Indonesia, although the prevalence of obesity has doubled in the past decade (11.7% in 2010 to 21.8% in 2018), SSB taxes have not yet been implemented. Utilizing the 2021 Indonesian household socioeconomic survey (SUSENAS), this study estimated price elasticities and projected the plausible effects of implementing an SSB tax on consumers' demand for SSBs and the associated government revenue using the Quadratic Almost Ideal Demand System (QUAIDS) model. Five SSB groups were studied: 1) manufactured liquid milk; 2) sweetened condense milk; 3) instant coffee; 4) tea drinks and fizzy drinks with CO2; 5) fruit juices, "health" drinks, and energy drinks. The overall results showed that the non-milk SSB groups were price elastic. Probing deeper into the substitutions for SSB across categories, we found both substitutionary and complementary effects. Our analysis revealed that increasing SSB prices by 20% would reduce the demand for SSBs on average by 17.5% (14.3%-18.6% for each SSB group) and generate additional state revenue up to IDR 3,628.3 billion per year (approximately US$ 238.5 million or 0.2% of total tax revenue in 2022). Considering the health and economic impacts of high consumption of SSBs, this study provides empirical evidence that imposing taxes on SSBs could be an effective measure to reduce public consumption and to generate tax revenue for financing health programs that address obesity and NCDs in Indonesia.

The effect of income distribution on diet‐related environmental footprints: Evidence from urban China

AbstractGiven that income disparity is expanding and diet‐related environmental footprints are increasing in urban China, this study aims to investigate the heterogeneity in these footprints across various income classes and examine the effect of income distribution on the total environmental footprints. Based on the quadratic almost ideal demand system model and taking into consideration the problems of endogeneity of food expenditure and zero expenditure, we estimate the income elasticities for 10 food categories across seven income classes and project the diet‐related environmental footprints under seven scenarios for various strategies of the income distribution. The results show that per capita diet‐related environmental footprints are greater for higher income classes than for lower income classes, as the former consume more animal‐based food. Compared with high‐income classes, income growth favouring low‐income classes results in a rather significant increase in diet‐related environmental footprints. With further economic growth, the lowest income group makes the greatest contribution to the increase in diet‐related environmental footprints. Thus, policymakers should promote a more sustainable diet on the road to alleviating income inequality to ensure sustainable environmental development.

Women's empowerment and food consumption: Evidence from female-headed households in Tanzania

Despite the growing recognition of women's increasing role in the household and corresponding empowerment programs in sub-Saharan Africa, intensive research on the relationship between women's influence and household food consumption is minimal. Using the most recent (2017–2018) national household survey data from Tanzania, this study examined the influence of women's empowerment on household food consumption. First, we compared the monthly consumption of eight food categories between female-headed households (FHHs) and male-headed households (MHHs) using both descriptive statistics and the propensity score matching (PSM) method. Furthermore, we adopted the two-stage Linear Expenditure System and Almost Ideal Demand System model (LES-AIDS) to estimate income and price elasticities for the two household types. The results show that FHHs consume bread and cereals, fish, oils and fats, vegetables, and confectionery (sugar, jam, honey, chocolate, etc.) more than MHHs. Moreover, FHHs have a significantly higher income elasticity of demand for all food groups than MHHs. They are also more price elastic than MHHs in meat, fish, oils, fats, sugar, jam, honey, chocolate, etc.

Affordability and sustainability in the human right to water

PurposeThe purpose of this study is to analyze the affordability and sustainability of residential water consumption in Ecuador, a developing country.Design/methodology/approachTo determine affordability, the authors assess water consumption and its distribution across different income levels of the population in the three main cities: Cuenca, Guayaquil and Quito. The authors then simulate the effects of a pricing policy on sustainability by deriving demand elasticities through a quadratic almost ideal demand system (QUAIDS).FindingsResults show that Ecuador has low water tariffs with respect to other cities in Latin America, which points to its affordability. However, sustainability might not be guaranteed since consumption is overall higher than the level suggested by the World Health Organization. From an economic point of view, this could be motivated by the low tariffs. Indeed, the simulation of a pricing policy shows that higher prices can significantly reduce demand for most of the sample. However, in low-income households this reduction may compromise vital consumption.Research limitations/implicationsThis research has important implications in terms of stimulating the discussion of how water affordability and sustainability can be achieved. For the case study, Ecuador, the results indicate that sustainability may not be guaranteed and that policies need to be designed to encourage it. Another implication is that population income levels should be considered to avoid negative effects for the most vulnerable groups. The main limitations of this study are methodological. First, the QUAIDS model is based on a conditional demand model (Zhen et al., 2013), which does not take into account spending on other goods. Second, data availability is limited and prevents a deeper analysis.Originality/valueTo the best of the authors' knowledge, this is the first study to analyze these issues in Ecuador, a country that recognizes the human right to water at the constitutional level.

Competitiveness Analysis of Pakistan’s Cotton Yarn Exports Relative to India and USA: A Demand System Application with Focuses on China’s Market

This study employed the revealed comparative advantage (RCA), revealed symmetric comparative advantage (RSCA) and Vollrath’s indices to measure Pakistan’s export competitiveness of cotton yarn in the world. Meanwhile, the country’s export competitiveness is evaluated using the comparative advantage by countries index in China, the world’s largest consumer of cotton yarn and Pakistan’s main export destination. Additionally, linear approximated almost ideal demand systems (LA/AIDS) is employed to anticipate the demand relations for exports of cotton yarn (Pakistan, India and the USA) in the Chinese market over the period 1991–2019. The value of RCA indices greater than one indicates that the country has comparative advantage in exports of cotton yarn in both the global and Chinese market. The findings also revealed that the nation’s comparative advantage position has decreased in global market while improved in the regional market of China. Furthermore, based on the approximation of restricted LA/AIDS model, the results affirmed that the exports of cotton yarn had high own-price sensitivity with negative signs, whereas cross-price sensitivity with positive signs. With regards to Pakistan’s exports, estimates of cross-prices indicate that China’s imports of yarn from Pakistan are substitutable for imports of yarn from India and the USA. In addition, the expenditure elasticity for India and US cotton yarn is greater than one, indicating that China viewed their exports of cotton yarn as quality good. On the other hand, the expenditure elasticity for Pakistan’s is less than one, but close enough to one, which reflects the cut-off point for exports of quality goods. Pakistan, therefore, needs to produce cotton yarn more efficiently by reducing costs and enhancing the reputation of quality to increase exports and market share.

Examining Fruit Demand Elasticities In 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.