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Demand analyses of rice in Malaysia

Author

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  • Tey, (John) Yeong-Sheng
  • Shamsudin, Mad Nasir
  • Mohamed, Zainalabidin
  • Abdullah, Amin Mahir
  • Radam, Alias

Abstract

As a typical developing Asian county, the growth in per capita income generally brings to diversification in Malaysians food basket. The most significant observation is the falling in per capita consumption of rice with continuous growth of demand for wheat based products. The objective of this study is to estimate the demand elasticities of rice in Malaysia, focusing whether rice is an inferior good. By using data from Household Expenditure Survey 2004/2005, this study obtains demand elasticities of rice, as well as for other 11 food items via Linear Approximate Almost Ideal Demand System (LA/AIDS) and Quadratic Almost Ideal Demand System (QUAIDS). The empirical results indicate that income elasticity of demand for rice (0.7104) is the highest compared to other food items in the LA/AIDS model, while income elasticity of demand for wheat (0.5087) is higher than rice (0.4712). Both of the income elasticities of demand for rice suggest that rice is not an inferior good in Malaysia. However, by comparing both estimates of demand elasticities and adjusted R2s, the QUAIDS model provides more plausible results than the LA/AIDS model.

Suggested Citation

  • 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.
  • Handle: RePEc:pra:mprapa:15062
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    File URL: https://mpra.ub.uni-muenchen.de/15062/1/MPRA_paper_15062.pdf
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    References listed on IDEAS

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    5. Akira Ishida & Siong-Hook Law & Yoshihisa Aita, 2003. "Changes in food consumption expenditure in Malaysia," Agribusiness, John Wiley & Sons, Ltd., vol. 19(1), pages 61-76.
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    Cited by:

    1. Tan, Andrew K. G. & Yen, Steven T. & Hasan, Abdul Rahman & Muhamed, Kamarudin, 2015. "Determinants of Purchase Likelihoods and Amounts Spent on Meat in Malaysia: A Sample Selection System Approach," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 44(1), April.

    More about this item

    Keywords

    Rice; Wheat; Inferior Good; Linear Approximate Almost Ideal Demand System; Quadratic Almost Ideal Demand System; Income Elasticity;

    JEL classification:

    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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