Demand Elasticity of Imported Fruits in the Kingdom of Saudi Arabia
Abstract
The present research estimated the demand for imported fruits in the Kingdom of Saudi Arabia using time series data that spanned for a period of thirty-eight years (1979-2017). The data were sourced from the FAO and UNCTAD databases and they covered import quantities and values for apple, banana, grape, orange, pineapple and straw berry. The collected data were analyzed using descriptive statistics and Linear Approximate Almost Ideal Demand System (LA/AIDS) model. Based on the findings it was observed that apple has the highest average budget share while orange has the highest marginal budget share. The empirical evidence showed that all the fruit commodities are normal goods with apple, banana and grape been necessities while orange, pineapple and straw berry were luxuries. Furthermore, it was established that income effect waxed stronger effect than price in influencing demand for imported fruit commodities as evidenced from the high values of uncompensated cross-price elasticities over the compensated cross-price elasticities. Therefore, the study recommends that the country should embark on intensive local production of these fruit commodities especially the necessary ones so as to maximize their foreign exchange and take advantage of tourism population influx. By so doing the economy of the nation will be able to absorb any marketing shocks which might arise as a result of market imperfection from fruit exporting markets.
Keywords
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