A Comparison of Almost Ideal Demand System vs. Rotterdam model as Related to Milk and Dairy Products

Document Type : Research Paper

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Abstract

Almost Ideal Demand System (AIDS) and Rotterdam Model have been employed to (by means of Seemingly Unrelated Regression (SUR) estimate the function related to milk and dairy products in the urban societies of Iran for years 1982 to 2009. Cross and cross price elasticities have been evaluated too. Results indicated that during the study period, share of milk products in household budget was more than that of milk in that budget. Calculation of milk and dairy products' price elasticity implies that milk price elasticity exceeds unity, so price instrument seems suitable for changing the quantity of demand in a way that consumers would profusely react to price fluctuations. Ultimately with respect to economic theories and some statistical tests it has been proven that AIDS is more applicable than Rotterdam model as regards milk and dairy products during the mentioned test periods.
JEL classification: C23- H21

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