Demand analyses of rice in Malaysia Report as inadecuate

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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.

Item Type: MPRA Paper -

Original Title: Demand analyses of rice in Malaysia-

Language: English-

Keywords: Rice, Wheat, Inferior Good, Linear Approximate Almost Ideal Demand System, Quadratic Almost Ideal Demand System, Income Elasticity-

Subjects: Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q11 - Aggregate Supply and Demand Analysis ; PricesD - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis-

Author: Tey, John Yeong-Sheng


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