Demand for Major Food Items in India:An Application of QUAIDS Model

Abstract

The estimation of the demand parameters of different food items is a complex problem in demand analysis. Typically, the analyst is interested in understanding the role of different variables like price, income and other random factors in determining the consumption basket of important food items. The popular approaches to the estimation of demand equation parameters are Linear Expenditure System (LES) developed by Stone (1954), the Almost Ideal Demand System (AIDS) developed by Deaton and Muellbauer (1980) and the combination of these two systems into a Generalized Almost Ideal Demand System (GAIDS) proposed by Ballino (1990). The present paper in this context applies the Quadratic Almost Ideal System (QUAIS) technique to the food demand system. QUAIDS model is an extended form of AIDS model, where the assumption of linearity in the expenditure function is given away. The QUAIDS Model is applied to the food items like cereals, pulses, milk, sugar, food oil, meat & chicken and vegetables. The compensated and uncompensated demand elasticities of these food items are derived. The present study found that, the square term of per capita food expenditure were found to statistically significant in all most all food items except pulses in rural area and pulses and food oil in urban area of India. The rural people are more affected by the change in the price of different food items than urban people.