Economic Analysis of Potato Demand in Saudi Arabia

Abstract

A Linear Approximation Almost Ideal Demand System (LA/AIDS) was used to fit import and domestic data for potato in four importing and one domestic markets. Significance level of estimated marginal shares, expenditure elasticities, signs of own price Slutsky parameters, and Cournot own price elasticities indicated that the model fit the data reasonably well. The results indicate that increasing potatoes expenditure by 1% will increase the demand for domestic production by 2% compared with 0.58% and 0.29% for Egyptian and Syrian potatoes respectively, while potatoes impotes from other countries will decrease by 0.52%. Results of price elasticities indicated that if domestic price increase by 1% would result to decrease domestic demand for potato by 1.58%. Increasing price of Syria, Lebanon, and other countries by 1% would result to increase domestic market share by 0.13%, 0.15%, and 0.01%, respectively. The result illustrated that the demand for domestic potato has a strong preference while for other sources were substantially weaker