Income Elasticity for Direct and Indirect Demand of Food Grains
Laura Cornelsen, Andrew Dorward
Income elasticity describes the relationship between demand and incomes. Usually when incomes increase the demand for food increases but not as much.
A 10% increase in income leads to a 2-4% increase in demand for grains. When incomes increase there is also more demand for meat and thus more demand for grains for livestock feed (indirect demand).
There is a contradiction in the literature as it is generally stated that income elasticity for grain demand is small (i.e. demand does not change much when incomes increase) but at the same time acknowledge an increased demand for grains for livestock feed.
This project seeks to analyse the income elasticity for grain demand differentiating between the demand for consumption and for livestock feed and if possible, provide new estimates taking into account both direct and indirect demand.
The findings will provide important input into macro models estimating food demand and supply and help improve understanding of the substitution between foods when incomes change.
Results are not yet available.