Essays on Import Demand Estimation of Two Commodities in the United States Research Proposal

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The paper "Import Demand Estimation of Two Commodities in the United States" is a wonderful example of a research proposal on macro and microeconomics. This paper gives a report on the import demand estimation of two commodities in the United States. The commodities under study here are pharmaceutical products and chemical products. The analysis is done using excel on and regression on the effect of income and price on demand of these two commodities are done. The result shows that price, income, and demand are inversely related and there are price elasticities on demand for both pharmaceutical and chemical products.

The finding also shows that income demand elasticities for the two products are also high. These findings are similar to the study done by Judge and Miller (2000) but contradict the findings of Frank and Atle (2009) on the import demand estimation of swordfish. 1.0 Introduction When investigating trade allocation, the demand system is normally preferred and it has been used in a number of papers like Daffy et al, David and Krus among other literature. In this discussion, we are going to base our estimation using the Armirgton approach and the assumption to be used here is that goods from all sources have the ability to be separated from each other (Reed and Hallahan.

2005). Statistical surveys of consumer behavior do rarely collect information about the price of specific individual commodity units. Consumer theory suggests that observed commodity prices should be identical in order for the household to make similar consumption decisions in the market. Though, econometric estimation of the consumer demand always requires that the demand function requires a substantial price variability of commodities price and without which the duality approach for demand estimation would be infeasible Unrealistic characteristics of the traditional approach to demand function estimation is the absence of primal information which is presented by the first-order necessary condition for utility maximization.

More flexible functions like almost the ideal demand system (AIDS) of Deaton and Muellbauer, the primal relations contribute independent information that exists only in a latent state (Reed and Hallahan. 2005). Therefore, the only efficient estimators of the demand functions require the utilization of the complete system of primal and dual relations.

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