ESTIMATION OF VEGETABLE DEMAND ELASTICITIES IN BANGLADESH: APPLICATION OF ALMOST IDEAL DEMAND SYSTEM MODEL
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The study estimated vegetable demand elasticities in Bangladesh by using Almost Ideal Demand System (AIDS) model with corrected Stone price index. The study was conducted in Sherpur, Mymensingh Sadar under Mymensingh district and Ramna Thana under Dhaka Municipality. The household expenditure survey data was used in the study. The study revealed that the income (expenditure) elasticity for fresh vegetable was 0.58. The compensated and uncompensated own price elasticities indicated that all food items were price inelastic. Where estimated uncompensated own price elasticity of vegetables at the national level indicated that if the price of vegetables falls by 10% the demand for vegetables would increase by 4.09%. Of this total increase in demand, 3.61% is purely due to price effect (i.e. the substitute effect) as the compensated elasticity suggests. The estimates of cross price elasticities indicated that the substitution effects of price change were not strong. Therefore, government price intervention might not lead to considerable price repercussion in the economy.