THE DEMAND FOR BANANAS AND THE ECONOMIC EFFECT OF SUPPLY RESTRICTION

J. B. Chadwick and W. L. Nieuwoudt

Agrekon, 1985, vol. 24, issue 2

Abstract: The wholesale demand elasticity of bananas was estimated at between -0,52 and -0,66 for the short run and between -0,65 and -0,71 for the long run. Estimates of demand elasticities using Time Varying Parameters varied between -0,62 and -0,93, also indicating that the demand becomes less price elastic during summer months. Retail elasticities were estimated at between -1,42 and -1,52 for the short run and at -1,79 for the long run. The social cost of the banana control programme is estimated at between 7,8 % and 12,68 % of income transfer between producers and consumers in marketing areas. The impact of cut-backs in banana production where entry is free (any farmer can produce bananas) is to increase prices in marketing areas, but depress prices in production areas. It is uncertain whether farm income can be increased significantly through such a scheme even though the demand is inelastic, if the supply of good banana land is not limited.

Keywords: Crop Production/Industries; Demand and Price Analysis (search for similar items in EconPapers)
Date: 1985
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Persistent link: https://EconPapers.repec.org/RePEc:ags:agreko:267083

DOI: 10.22004/ag.econ.267083

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