Kazi Tamim Rahman^1,, Mohammad Surozzaman², Mashrat Jahan¹, Mohammod Enamul Haque³, M. Salauddin Palash⁴

This study applies the Almost Ideal Demand System (AIDS) to estimate consumers demand for 9 major aggregate food items in the United States using household survey data from January 1959 to February 2016. More specifically, consumers’ price and expenditure sensitivity of demand was examined for cereals and bakery products; meats and poultry; fish and seafood; milk, dairy products and eggs; fats and oils; fresh fruit and vegetables; processed fruits and vegetables; sugar and sweets; and other foods. The empirical results illustrate that the consumption pattern of U.S. households has been changed significantly over the past 30 years. Although meats and poultry have the largest expenditure share but show a decreasing trend over the study period. Whereas, expenditure shares for processed fruits and vegetables, sugar and sweets, fats and oils, fish and sea exhibit very small changes. The compensated own price elasticities indicate that all food items are price inelastic having elasticities between -0.25 to -0.78. The compensated cross price elasticity estimates show that cereals and bakery products is a significant substitute of meats and poultry, fats and oil, and fresh fruits and vegetables but complement to fish and seafood, and processed fruits and vegetables. Expenditure elasticities of all goods are positive indicating all food categories are normal goods. The findings of the study would be helpful for the policy makers and agribusiness market participants to formulate effective policies and strategies for the improvement of consumers’ as well as producers’ welfare.

food demand, AIDS model, expenditure elasticity, price elasticity, cross price elasticity