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

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  • Md Abu Bakr Siddique
  • Md Abdus Salam
  • Mohammad Chhiddikur Rahman

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.

Suggested Citation

  • Md Abu Bakr Siddique & Md Abdus Salam & Mohammad Chhiddikur Rahman, 2020. "Estimating the Demand Elasticity of Rice in Bangladesh: An Application of the AIDS Model," Asian Journal of Agriculture and Rural Development, Asian Economic and Social Society, vol. 10(3), pages 721-728.
    • Handle: RePEc:asi:ajosrd:v:10:y:2020:i:3:p:721-728:id:2102
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    1. Siddique, Md. Abu Bakr & Sarkar, Md. Abdur Rouf & Rahman, Mohammad Chhiddikur & Chowdhury, Afroza & Rahman, Md. Shajedur & Deb, Limon, 2017. "Rice farmers’ technical efficiency under abiotic stresses in Bangladesh," Asian Journal of Agriculture and Rural Development, Asian Economic and Social Society (AESS), vol. 7(11), January.
    2. Giancarlo Moschini, 1995. "Units of Measurement and the Stone Index in Demand System Estimation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(1), pages 63-68.
    3. Blanciforti, Laura & Green, Richard, 1983. "An Almost Ideal Demand System Incorporating Habits: An Analysis of Expenditures on Food and Aggregate Commodity Groups," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 511-515, August.
    4. Islam, M. Rafiqul & Hossain, Mahabub & Jaim, W. M. H., 2007. "Disaggregated Demand For Rice In Bangladesh: An Analysis Using La/Aids Model," Bangladesh Journal of Agricultural Economics, Bangladesh Agricultural University, vol. 30(01), pages 1-22, June.
    5. Hossain, Monzur & Yunus, Mohammad, 2016. "Estimates of Per Capita Consumption of Food Grains in Bangladesh," Bangladesh Development Studies, Bangladesh Institute of Development Studies (BIDS), vol. 39(1-2), pages 103-116, March-Jun.
    6. Md. Abu Bakr Siddique & Md. Abdur Rouf Sarkar & Mohammad Chhiddikur Rahman & Afroza Chowdhury & Md. Shajedur Rahaman & Limon Deb, 2017. "Rice farmers technical efficiency under abiotic stresses in Bangladesh," Asian Journal of Agriculture and rural Development, Asian Economic and Social Society, vol. 7(11), pages 219-232, November.
    7. Tey, (John) Yeong-Sheng & Shamsudin, Mad Nasir & Mohamed, Zainalabidin & Abdullah, Amin Mahir & Radam, Alias, 2008. "Demand analyses of rice in Malaysia," MPRA Paper 15062, University Library of Munich, Germany.
    8. Richard Green & Julian M. Alston, 1990. "Elasticities in AIDS Models," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(2), pages 442-445.
    9. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-326, June.
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    Cited by:

    1. Mohammad Chhiddikur Rahman & Valerien O. Pede & Jean Balié, 2022. "Welfare impact of asymmetric price transmission on rice consumers in Bangladesh," Review of Development Economics, Wiley Blackwell, vol. 26(3), pages 1600-1617, August.
    2. Kharisma, Bayu & Hasanah, Alfiah & Remi, Sutyastie Soemitro & Zakia, In in Indah, 2021. "The pattern of poor household food consumption: The case of West Java Province," Economia Agraria y Recursos Naturales, Spanish Association of Agricultural Economists, vol. 21(02), December.
    3. Rahman, Mohammad Chhiddikur & Rahaman, Md. Shajedur & Islam, Mohammad Ariful & Omar, Md. Imran & Siddique, Md. Abu Bakr, 2021. "Deployment Strategies for Golden Rice in Bangladesh: A Study on Affordability and Varietal Choice with the Target Beneficiaries," EconStor Preprints 241994, ZBW - Leibniz Information Centre for Economics.
    4. Rahaman, Md Shajedur & Haque, Sadika & Sarkar, Md Abdur Rouf & Rahman, Mohammad Chhiddikur & Reza, Md Salim & Islam, Mohammad Ariful & Siddique, Md Abu Bakr, 2021. "A Cost Efficiency Analysis of Boro Rice Production in Dinajpur District of Bangladesh," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 6(1), pages 67-77.

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