Effect of Income and Economies of Scale on Household Food Demand in Pakistan

This paper determines the household food demand for various income groups in Pakistan namely, The Lower Income Group (≤ $ 93.023), Lower-middle Income Group ( $93.034-139.534), Middle Income Group ($139.546-209.302), Upper-middle Income Group ($ 209.314-406.977) and Upper Income Group ($406.977+) United States dollars respectively. The Pakistani rupees are converted into US $ according to the average exchange rate of (2010-11).The study uses Pakistan Social and Living Standard Measurement Survey data (2010-11) conducted by the Federal Bureau of Statistics, Government of Pakistan, Islamabad. The food expenditures are the sum of monthly expenditures by each household on the following 16 major food items, wheat, rice, pulses, vegetables ghee, Milk (Fresh), butter, mutton, beef, chicken, fish, fruits, vegetables, salt, spices, sugar and gur. The household size and income elasticities are estimated to explain the food consumption trends in Pakistan. The results of the study indicate that all the income and household size elasticities are positive and significant at one percent level of significance. And the study also indicates that food income elasticity is the highest (0.901) for the Lower-Middle Income Group and the same is the lowest (0.716) for the Upper Income Group. Similarly, household size elasticity is the highest (0.181) for the Upper Income Group and the same is the lowest (0.067) for Lower Income Group. It is highly recommended that family planning system should be introduced in the country to keep away from the harmful impact of large family sizes upon the household food consumption, and it is also necessary for policy makers to make plan to improve the food availability and to increase family income to develop the standard and quality of the rural people of Pakistan.