Estimating the Demand Elasticity of Rice in Bangladesh: An Application of the Aids Model

Md. Abu Bakr Siddique, Md. Abdus Salam and Mohammad Chhiddikur Rahman

Asian Journal of Agriculture and Rural Development, 2020, vol. 10, issue 03

Abstract: This study determines the causes of consumption, compensated, and uncompensated demand for rice using the Linear Approximate Almost Ideal Demand System (LA-AIDS) model in Bangladesh. The model was used along with the corrected Stone Price Index. The study's findings showed that the income elasticity of demand for rice was only 0.76, indicating that rice is a normal and necessary food item. The own-price elasticity (compensated and uncompensated) showed that all food items were price inelastic. The rice's own-price elasticity demonstrated that if the price falls by 10%, rice demand will rise by 8.21%. This cross-price elasticity showed the weak substitution effects of a price change. Therefore, price interference may not lead to a substantial effect on food demand.

Keywords: Demand; and; Price; Analysis (search for similar items in EconPapers)
Date: 2020
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Journal Article: Estimating the Demand Elasticity of Rice in Bangladesh: An Application of the AIDS Model (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:ajosrd:342291

DOI: 10.22004/ag.econ.342291

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