Estimation of Supply and Demand Elasticities for Major Crops Produced in Pakistan

Abstract

This article studies the supply and demand of major Pakistani crops. We estimate supply elasticities using a Nerlovian partial adjustment process and demand elasticities using the Deaton and Muellbauer Almost Ideal Demand Systems (AIDS). We use secondary data from various Household Integrated Economic Surveys and Agricultural Statistics of Pakistan. Our estimated supply elasticities with respect to price lie between 0.1 and 0.5 for all crops. Pulses tend to have higher elasticities than traditional crops such as wheat and rice. Demand elasticities with respect to price tend to be inelastic, with the exception of poultry and fruit which appear to be luxury items. Pulses are income inelastic, implying that consumption may not rise significantly as per capita incomes and that the introduction of yield enhancing varieties will lead to lower prices.