Own-price Elasticities Research Articles

Demand For Pesticides On Shallot Farming In Sanden Sub- District Bantul Regency

Sanden Sub-district is one of the shallots producing centers in Bantul Regency. The research objectives are: (1) to identify the type of pesticides used by shallot farmers and to calculate the cost structure of shallot farming; (2) to measure the variation of pesticide usage based on the growing season; (3) to analyze determinants of the demand for pesticides (4) to calculate the own price and cross-price elasticities of the demand for pesticides. The location and respondents of the research are chosen purposively and the research involves 35 shallot farmers. The descriptive method is used to identify the type of pesticide usage. Paired Sample t-test is used to test the pesticide usage difference between seasons. The ordinary Least Square (OLS) method is employed to analyze the factors affecting the demand for pesticides. The own-price and cross-price elasticities are determined based on regression coefficients. The result of the analysis shows that the type of pesticides consists of insecticide and fungicide, and the pesticide cost contributes 8-10% of the total production cost. The pesticide usage between seasons is statistically different. The results also show that the determinant factors of the demand for pesticides are the price of pesticides, the price of shallot, land size, and the wage of labor. Both insecticide and fungicide demand are elastic to price change.

Households food consumption pattern in Pakistan: Evidence from recent household integrated economic survey

The analysis of food consumption pattern is a primary concern of any developing country because it is related with food security. Pakistan is one of the emerging nations of the developing world.Due to the similarities and differences in households' food consumption behavior, income distribution, the effects of alternative tax structures, cost-benefit analyses, and the choice of cost of living index, the study of households' food consumption pattern is crucial for a developing nation like Pakistan. Furthermore, for Pakistan's food security in the present and the future, an analysis of food consumption pattern is crucial. The main objective of this study is to analyze the households' food consumption pattern. Linear Approximation Almost Ideal Demand System (LA/AIDS) is applied using data from Household Integrated Economic Survey (HIES) for the year 2018–19. This study makes a significant contribution by estimating household age composition elasticities, which were absent from earlier studies. Results from the income elasticities reveal that milk, meat, and fruits are luxuries food items. Similarly, on the basis of inelastic income elasticities we declared cereals, pulses, vegetables, sugar, and ghee as necessity food items. Results from the compensated own price elasticities show that the eight food commodity groups have inelastic own-price elasticities. This implies that these food commodities are integral food items of household diet. Results from the compensated cross-price elasticities shows that cereals and pulses, cereals and vegetables, pulses and vegetables, milk and fruits, meat and fruits, and milk and ghee are gross substitutes. On the other hand, pulses and meat, pulses and fruits, and ghee and meat are gross complements. According to the findings of the household age composition elasticities, adding children to a household significantly increases its sugar consumption while significantly reducing its fruit consumption. Any increase in the size of the household by an adolescent, adult, or a person in their middle age results in a significant increase in the consumption of cereals and a significant drop in the consumption of fruits. Finally, any increase in the size of the households brought about by an elder resulted in a significant rise in the consumption of cereals and a significant drop in the consumption of vegetables.

Dynamic modelling of consumption patterns using LA-AIDS: a comparative study of developed versus developing countries

The traditional applied demand system estimation assumes that when consumer income and commodity prices change, the consumers instantaneously fully adjust to a new consumption equilibrium level and use a static demand system such as Static Linear Almost Ideal Demand System (Static LA-AIDS) for estimation. However, in real-life situations, such an assumption does not hold as consumers take time to settle to a new consumption equilibrium level. Hence, dynamic demand system estimations generate more nuanced insights into the short-run dynamics of consumer demand. This paper estimates two forms of dynamic versions of AIDS, Dynamic LA-AIDS and the error-corrected LA-AIDS, and compares the results with the Static LA-AIDS. The paper also models the consumption patterns of consumers in developed and developing countries and provides a comparative analysis of implied elasticities using recent data. The results show that the dynamic models support demand theory hypotheses—demand homogeneity and Slutsky symmetry—more than the static model. The estimated mean own-price elasticities reveal that the demand in the short-run and long-run is price inelastic across all countries. Long-run and short-run income elasticities demonstrated notable variation across various commodity groups and country groups. For example, the restaurant meal is a luxury in the short-run for all countries. In the long-run, it is a necessity in developed countries and a luxury in developing countries. Food and housing are necessities; durables, transport and recreation are luxuries in developed and developing countries in the long-run and short-run.

Structure of Vegetables Demand in India during Covid-19 Regime- An Econometric Approach

This study aimed to analyze the expenditure, own and cross-price elasticities of ten major vegetables in Southern India. using cross-sectional data from selected households in four southern states of India viz., Andhra Pradesh, Telangana, Karnataka and Tamil Nadu during 2020 to 2022. We use Working-Leser model, LA/AIDS model and QUAIDS model to compute elasticities and found QUAIDS model as the best fit. As expected the own-price elasticities for all the vegetables are negative and the expenditure elasticities are more than one, except tomato, lettuce and green sorrel. The cross-price elasticities showed that potato is complementarity to tomato, lettuce and green sorrel and the substitution effects of price change were not quite strong, except ivy gourd for bitter gourd; potato for ivy gourd and green sorrel for bitter gourd. Systematic differences in the absolute magnitudes of the expenditure elasticity and own-price elasticity were found and the demand for vegetables is largely influenced by the price change than the income/expenditure change. So, an appropriate price intervention policy by the Government may be more effective in influencing consumption pattern of vegetables enjoying more elastic demand.

Effect of price and income on the demand for sugar-sweetened beverages in Nigeria: an analysis of household consumption data using an almost ideal demand system (AIDS)

ObjectivesTo estimate the own-price, cross-price and income elasticities for carbonated soft drinks (CSDs), malt drinks, chocolate powder, sachet water and sugar in Nigeria. These elasticities can be used to estimate...

The pattern of healthy diets and zero hunger among households in South-West Nigeria: application of linear approximation to quadratic almost ideal demand system.

Malnutrition and food insecurity remain a significant public health challenge globally, affecting millions of people, particularly in low- and middle-income countries. In Nigeria, the prevalence of malnutrition and food insecurity is high, with a significant burden in the South-West region. Despite several interventions aimed at promoting healthy diets and reducing food insecurity, little is known about the pattern of healthy diets and zero hunger among households, as well as the budget shares on the food items driving these outcomes. Therefore, this study analyzes the pattern of healthy diets and zero hunger among households in South-West Nigeria, using the primary data elicited from 600 rice-consuming households, drawn through a multistage random sampling technique. Descriptive statistics and Linear Approximation to Quadratic Almost Ideal Demand System (LA-QUAIDS) model were used to analyze the dataset. The estimated LA-QUAIDS model was helpful to decipher the relationships that may not be possible to discover using a single-equation model. The finding of this study revealed that rice, especially local (Ofada) rice, is the most consumed food item among the households in the study area with a monthly budget share of 0.195. This is an indication that households spend approximately 19.5% of their monthly food expenditure share on rice consumption. The results also indicated that yam flour (-0.10), cassava-gari (-2.12), and meat (-0.03) are net complements to rice, while the rest of the food items are regarded as net substitutes. The estimated compensated (-1.64) and uncompensated (-1.69) own-price elasticities of local rice, respectively, indicate that local rice variety is price inelastic, and the estimated expenditure elasticity (0.02) suggests that local rice is not a luxury food in the household food basket but a necessity. This study affirms the importance of locally produced foods, especially local rice to the households in the study area. In light of the findings, this study recommends adequate policy aimed at reducing the cost of local food production by boosting domestic production. Apparently, this will technically trigger market price adjustment, as shown in this study, where local rice was estimated to be own-price elastic in nature.

Quadratic almost ideal demand system analysis of demand for selected vegetables and fruits in nigeria

This study analyzed the demand for selected vegetables and fruits in Nigeria. It determined price effects on demand for fruits and vegetables, examined the demographic variables influencing demand and revealed the expenditure elasticity across income quartiles and sectors. Data from the three waves of Living Standard Measurement Survey-Integrated Survey on Agriculture namely 2010/11, 2012/13 and 2015/16, were employed in the analysis. The demand for bananas, citrus, pineapples, fresh okra, onions pepper and tomatoes was examined using the Quadratic Almost Ideal Demand System. Households in Nigeria consumed more vegetables than fruits. The results revealed that the staple vegetables in Nigerian diets are tomatoes, onions and pepper. It was observed that movement in relative prices elicited high quantity response. All the fruits and vegetables included in the model were normal goods. Vegetables and fruits responded similarly to expenditure increases in urban and rural Nigeria. The own-price elasticities, both uncompensated and compensated agree with the demand theory. More consideration should be given to the intensifying production of fruits and vegetables in technology development and investment to make them available and affordable.

Behavioral economic relationship between cannabis flower and concentrates: Evidence from simulated purchase tasks.

Cannabis users use different forms of cannabis, which are associated with distinct public health concerns. Policies that aim to regulate one specific form may have unintended impacts on other forms. This study examined the behavioral economic relationship between flower and concentrates, the two most common forms of cannabis. We surveyed 605 adult cannabis users (21+) who lived in one of the U.S. states that had legalized recreational cannabis by the time of interview in 2019. The participants completed simulated purchase tasks, which asked how much cannabis flower and concentrates they would purchase in the next 30 days at escalating prices. We estimated (a) demand indices and own-price elasticities using nonlinear exponential demand models and (b) group- and individual-level cross-price elasticities using log-linear demand models. The estimated rate of change in demand elasticity (α) was 0.00066 for cannabis flower (SE = 0.00002, p < .001) and 0.00058 for cannabis concentrate (SE = 0.00002, p < .001). Group-level cross-price elasticity estimate (slope = -0.075, SE = 0.0135, p < .001) indicated that cannabis flower and concentrates were weak complements. Individual-level cross-price elasticity estimates showed that flower and concentrates were treated as independent by 76.2% of the users, as complements by 19.0% of the users, and as substitutes by 4.8% of the users. The findings suggested that cannabis flower and concentrates were overall weak complements and for most adult cannabis users were treated as independent of each other. Price and tax policies regulating either cannabis form may have minimal impacts on the other form. (PsycInfo Database Record (c) 2023 APA, all rights reserved).

Import demand under price and exchange-rate uncertainties: The case of U.S. Atlantic salmon imports

This study investigates the impacts of price and exchange rate volatilities on Atlantic salmon imports in the U.S. market. We first derive an extended Rotterdam demand model, revealing how risk factors affect import demand through ‘adjusted’ prices. For example, the theoretical model shows that risk-averse importers add risk premiums as a markup for the cost of risk factors. Moreover, the trade effect of volatility variables depends on own-price elasticities and the degree of substitutability between competing products. Our empirical results reveal that U.S. salmon importers are sensitive to price and exchange rate volatilities; however, these two risk factors have differing impacts on import demand, implying the necessity (or effect) of hedging strategies.

Farm households’ input demand and output supply response to price shocks in Nigeria

Panel data on farm household output for a full range of commodities are scarce, and as a consequence, only a few other studies have considered estimating farm household output supply and input demand response to price changes in Nigeria using panel data within the multiple inputs and multiple outputs frameworks. This study examined the extent to which farm households' respond to production inputs and output price changes using panel data covering the period 2010-2016. Specifically, to determine whether a commodity output's price positively affects its supply and other output categories; and whether an input price negatively affects its usage in Nigeria within the multiple input and multiple output (MI-MO) framework. The translog profit function was used to simultaneously examine the production response of farm households' in terms of the factor demand and produce supply. Seven output supply and four input demand equations were estimated. The results indicated that the response of output supply to own price ranged from 0.59 for animal products and 1.24 for cereals. The own-price demand elasticities of farm input range from -0.82 for mechanisation to -1.46 for intermediate inputs. Also, a substantial degree of farm households' response to input price shocks. Farm inputs and outputs were economic complements to price changes. Therefore, price policy issues aimed at improving the production response of farm households' to both input and output price shocks should be developed with a particular focus on farm inputs.

The economic cost of fuel subsidies in Ghana

Apart from fuel subsidies failing to provide the greatest benefits to the poor, they create overconsumption, market inefficiencies and negative environmental and social externalities. This study extended the comprehensive Harberger formula for deadweight loss (DWL) to account for the cross-price substitution effects between the gasoline and diesel markets, estimated the own-price and cross-price elasticities for gasoline and diesel in Africa, and predicted the DWL or economic cost created by gasoline and diesel subsidies in Ghana. Using the simple Harberger formula yields DWL estimates ranging from GHS 2.03 to 8.58 million per year from 2009 to 2014, but accounting for cross-price effects reduces the DWL estimates, from GHS 1.53 to 7.55 million per year, over the same period. However, because fuel demand is highly price inelastic, the DWL created for every GHS 1 million spent on gasoline and diesel subsidies only represents between 0.5% and 2% of subsidy expenditures. These findings suggest that fuel subsidy reforms would be better motivated by other social problems associated with fuel subsidies, such as the ineffective targeting of such subsidies to poorer consumers and the negative externalities of overconsumption, rather than the economic inefficiencies that fuel subsidies generate.

Factors affecting household carbohydrate food consumption in Central Java: Before and during the COVID-19 pandemic

Abstract The COVID-19 pandemic has resulted in a change in food demand. In Central Java, during the pandemic (2021), the proportion of expenditure on the grain food group was higher than in 2020; meanwhile, the proportion of the ready-to-eat food group decreased. This study aims to analyze the pattern of food consumption of carbohydrate sources, the influencing factors, and the elasticity of consumption in households in Central Java before and during the COVID-19 pandemic. This study uses data from the National Socio-Economic Survey (Susenas) for 12 districts/cities in Central Java consisting of 9,812 in 2019 and 10,636 households samples in 2021. Data analysis used the Linear Approximation Almost Ideal Demand System (LA-AIDS) method. Results of the study show that the COVID-19 pandemic has caused changes in the household consumption pattern of carbohydrate-source food in Central Java. The proportion of expenditure on rice, wheat flour, shelled corn, cassava, and potatoes has increased. On the other hand, wet corn, instant noodles, and white rice decreased. The price of food sources of carbohydrates and the number of household members positively affect the consumption of food sources of carbohydrates. At the same time, income has a negative effect. There are differences in the effect of the location of the residence on the consumption of food sources of carbohydrates before and during the pandemic. The value of own-price elasticity and income elasticity shows that before the pandemic, rice was a staple good whose consumption was inelastic. Before and during the COVID-19 pandemic, wheat flour, wet-skinned corn, shelled corn, potatoes, white rice, and cassava in the pre-pandemic period was Giffen because the price elasticity was positive, and the income elasticity was negative. Meanwhile, rice during the pandemic, instant noodles before and during the pandemic, and cassava were Veblen goods because their price and income elasticity were positive. Cross elasticity shows that before the pandemic, most of the relationships between food sources of carbohydrates were substitutes, while during the pandemic, most of the relationships between food sources of carbohydrates were complementary.

Monitoring and Combating Waterpipe Tobacco Smoking Through Surveillance and Taxation

Waterpipe tobacco smoking (WTS) is a traditional tobacco use method that originated in the Eastern Mediterranean Region (EMR) and has resurged in recent decades. WTS rates in the EMR are the highest worldwide, especially among youth, exceeding cigarette-smoking rates in select jurisdictions. Despite its documented harm, the growing prevalence of WTS has been met with a poor regulatory response globally. At the epicenter of the WTS epidemic, countries in the EMR are in urgent need of effective tobacco control strategies that consider the particularities of WTS. A roundtable session, titled "Monitoring and Combating WTS Through Taxation and the Global Tobacco Surveillance System (GTSS)," was held as part of the 7th Eastern Mediterranean Public Health Network's regional conference. The session provided an overview of evidence to date about WTS policy control, the taxation of WTS, volumetric choice experiments for tobacco control research, and monitoring WTS patterns and control policies among adults and youth through the GTSS. The session highlighted the need to update the regulation of WTS in the current global tobacco control policy frameworks and the need for developing tailored, evidence-based, and WTS-specific regulations to complement current tobacco control policy frameworks. Raising taxes to increase the price of tobacco products is the single most effective tobacco control measure, and these taxes can fund expanded government health programs. The effectiveness of taxation can be measured via volumetric choice experiments, which allow for the estimation of a complete set of own-price and cross-price elasticities that are instrumental for fiscal policy simulations. Finally, the surveillance of WTS (for example, through the GTSS) is critical to informing policy and decision makers. The Global Youth Tobacco Survey (GYTS) and Global Adult Tobacco Survey (GATS) are 2 GTSS products that provide nationally representative data among students aged 13-15 years and persons ≥15 years, respectively.

Trends in household demand and greenhouse gas footprints in Germany: Evidence from microdata of the last 20 years

This paper quantifies changes in the trend of greenhouse gas footprints associated with household consumption covering a period of 20 years. We combine greenhouse gas emissions related to the supply chain (embedded) and consumption (direct) with households' consumption expenditures from the sample survey of income and expenditure (EVS), and present the first comprehensive study on trends in greenhouse gas footprints of German households. We find a decay in changes in GHG footprints as a response to increases in household expenditure over time. In addition, our estimated own-price elasticities for electricity and heating indicate an increasing demand response to higher energy prices. However, this does not translate to a clear decreasing trend in the total GHG footprint because of the role of changes in the demand of other commodities and changes in expenditure levels across years. Further, comparing results of the more advanced EASI demand system with those of the more widely used QUAIDS approach, we find sizable differences.

Demand for in-app purchases in mobile apps—A difference-in-difference approach

Using five “freemium” mobile app games on six European markets we examine the effect of price changes on conversion rate, number of users and viewing of rewarded videos. Our difference-in-difference estimation relies on games being available on both the Apple and Google platforms with price changes on only one platform. Our main identification comes from exogenous adjustments of Apples prices in 2021. Own-price elasticities of conversion are in the -1 to -4 range. Watching of rewarded videos decreases as in-app prices decrease with an average elasticity of around 0.5, but overall play is not affected by changes in-app prices.

Food Demand and Its Differential Effects on Household Food Access in Nigeria

This paper aims to examine how urban households’ food demand pattern differs with the extent of urbanization using a cross-sectional survey in southwest Nigeria. Using principal component analysis, sampled households were categorized by urbanicity index. A quadratic almost ideal demand system (QUAIDS) was employed to estimate expenditure and price elasticities. From the result, all seven food groups were normal goods across the urban categories, with the meat group being more expenditure-elastic than the others (1.16–2.42). The own-price elasticities differ among food commodities, with the meat and roots/tubers groups being most elastic at the low (−1.35) and middle (−1.05) urban categories, respectively. Findings suggest that changes in urbanicity levels have a substantial impact on the composition of household food demand and, by extension, the extent of food access in Nigeria. Therefore, the use of aggregate demand estimates for the entire urban population might underestimate the effect of expected changes in the urbanization level on food demand. JEL Classifications: C31, D12, Q18

Modeling Import Demand for Fishery Products in Japan: A Dynamic AIDS Approach

A dynamic AIDS model was employed to estimate the expenditure, own-price, and cross elasticity of five major import source countries for shrimp, salmon, albacore and tuna, crab, and cuttlefish in Japan. Our findings show that COVID-19 has had no significant impact on Japan’s fishery imports in the short term. The expenditure elasticities of fishery imports in Japan are greater than 1 or close to 1, implying that consumers in Japan have a relatively high dependence on fishery imports. Specifically, the expenditure elasticities of shrimp and cuttlefish imports from Vietnam, albacore and tuna imports from Australia, and crab imports from Russia are close to 1, while their own-price elasticities are the least sensitive compared with other import source countries, suggesting a greater export potential in the Japanese market.

Demand elasticity of import nuts in Korea

This paper empirically analyzes import demand for nuts in Korea using Almost Ideal Demand System (AIDS). Six budget shares and prices demand equations for nuts group: almond, pistachio, walnut, cashew, hazelnut and macadamia are analyzed during the period 2009 to 2019. Empirical results show that all uncompensated own-price elasticities are negative, walnut and pistachio are own-price elastic while almond, cashew, hazelnut and macadamia are own-price inelastic. Uncompensated cross-price elasticities indicate that nuts have both complementary and substitutable relationships. Expenditure elasticities reveal that all import nuts are expenditure inelastic and they can be considered as necessary goods in Korea. Our research can help related to policy decision for the demand of Korea import nuts.

Behavioral economic relationship between cannabis and cigarettes: Evidence from hypothetical purchase tasks.

In the United States (U.S), cannabis policies have been increasingly liberalized whereas tobacco policies have been increasingly stringent. Given the high prevalence of cannabis and tobacco dual use, there are concerns that a policy regulating one substance may unintendedly influence the other. This study examined the responsiveness of the demand for cannabis joints and cigarettes when price varied. The study included 338 adult participants (21+) who used both cannabis and tobacco and lived in one of the U.S. states with recreational cannabis legalized by the time of interview in 2019. They completed hypothetical purchase tasks to indicate the quantity desired of cannabis joints and cigarette packs 1) when only one substance was available with escalating prices and 2) when both substances were concurrently available with escalating prices of cannabis joints and a fixed price of cigarette packs. We estimated 1) the own-price elasticity of demand for each substance using nonlinear exponential demand model, and 2) the cross-price elasticity of demand at aggregate level using nonlinear exponential demand model and at individual level using log-linear demand model. The estimates for the rate of change of own-price elasticity (α) were 0.0011 (SE=0.000039, p<0.001) for cannabis joints and 0.00095 (SE=0.000037, p<0.001) for cigarette packs. The aggregate-level estimates of cross-price elasticity (I=13.032, SE=0.34, p<0.001; β=0.0029, SE=0.0021, p>0.05) suggest an independent relationship between the two substances. At individual level, 78.70% of the participants treated the two substances as independent, 17.46% as complements, and 3.85% as substitutes. For most adults who used both cannabis and tobacco in the U.S., cannabis joints and cigarettes had an independent relationship. Policies regulating the price of cannabis may not have large unintended consequences on cigarette use.

An experiment in own-price elasticity estimation for non-residential electricity demand in the U.S.

This paper uses an experiment to identify what modeling decisions significantly affect estimates of own-price elasticity for non-residential (commercial and industrial) electricity demand in the United States (U.S.). Based on 174,240 panel data model runs involving 10,944 monthly state-level observations from the Energy Information Administration for 2001–2019, these decisions are parametric specification, estimation method, and treatment of cross-section dependence. As most of the many generated elasticity estimates are between 0.0 and −0.2, price-induced conservation is likely modest, thus justifying continued policy support for energy efficiency standards and demand-side management in the U.S. path to deep decarbonization.