ESTIMATION OF DEMAND AND SUPPLY FUNCTIONS FOR FRESH AND INDUSTRIAL MILK IN SOUTH AFRICA

C. C. McKenzie and W. L. Nieuwoudt

Agrekon, 1985, vol. 24, issue 2

Abstract: The average price elasticity of demand for fresh milk is estimated from time series data at -0,78 at retail level and -0,51 at farm level. Demand functions indicate that the elasticity of fresh milk demand increased over time to near unity at retail level, due to growing proportion of Black consumers and increasing prevalence of substitutes. Elasticity estimates of industrial milk varied from -0,47 at the farm level to -0,93 at retail level. Elasticities of industrial milk was also found to increase over time. Income elasticities for fresh and industrial milk using cross sectional data were +0,44 for fresh milk and +0,40 for industrial milk. Estimates agree with the Slutsky-Schultz and Hicks Allen relation (Wold and Jureen) stating that as a rule income elasticities of necessity are smaller than price elasticities. The increase in the price elasticity of milk implies that consumption has become slightly more price responsive and that price may become a more important feature in the selling of milk. The supply elasticity of industrial milk was estimated at +0,55 at farming level.

Keywords: Demand and Price Analysis; Livestock Production/Industries (search for similar items in EconPapers)
Date: 1985
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:agreko:267085

DOI: 10.22004/ag.econ.267085

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