An Analysis of Preferences and Demand for Fruits in Pakistan Using Linear Approximate Almost Ideal Demand System

Abstract

Introduction: Consumer preferences play a significant role in determining the choices for purchasing fresh fruits. Consumer interest in fruits is crucial in influencing agricultural production and food policies. Factors like average income per person and the price of fruit have a notable impact on what consumers prefer and, as a result, on the demand for fruit. Objectives: The aim of this study is to examine the patterns of fruit consumption and preferences across the four provinces of Pakistan. Materials & Methods: Data from Household Integrated Economic Survey (HIES) 2018-19 is used for the selected fruits i.e. banana, malta, apple, grapes, watermelon alou bhukhara and dry fruits. The Linear Approximate Almost Ideal Demand System (LA/AIDS) model is used to estimate Marshallian, Hecksian and Expenditure elasticities of demand. Results: The result shows that the expenditure elasticities of all fruits for all provinces is positive and less than unity suggesting they are necessities except for dry fruits (1.2969) in Khyber Pakhtunkhwa, whose expenditure elasticity is greater than unity and considered as luxury in Khyber Pakhtunkhwa. There is no significant difference found by comparing Marshallian own price elasticities for all fruits across provinces of Pakistan. The estimated Marshallian own price elasticities for all fruits are inelastic in all provinces, while in Baluchistan banana (-0.9444) is close to unit elastic and it is inelastic in other three provinces i.e. Punjab, Sindh and Khyber Pakhtunkhwa, which means banana consumption is less in Baluchistan than other three provinces. Conclusion: According to estimates of Marshallian cross price elasticities 21 fruits were found to be complements, only alou bhukhara and dry fruits found to be substitute in Khyber Pakhtunkhwa, while other three provinces all fruits are complements. As most of the own price elasticities of fruits are inelastic for all provinces, any change in own price would result in a massive increase in expenditure on these fruits.