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Determinants
of aggregate household demand for edible oils in Imo State
N. N. O. Oguoma1, N. C.
Ehirim1*, G. N. Benchendo1, I. Nnadi1
and E. N. Okoronkwo2
1Department
of Agricultural Economics, Federal University of Technology,
Owerri Imo State, Nigeria.
2Department
of Food Technology, Akanu Ibam Federal Polytechnic, Uwana
Afikpo, Ebonyi State, Nigeria.
*Corresponding author. E-mail:
ehinadykus@yahoo.com.
Accepted 2 July, 2010 |
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The data
for the study were obtained from a stratified random sample
of 92 consumers of the two products across the three
agricultural zones in the state, using a well structured
questionnaire. Analysis was done using both economic models
and econometric tools like demand elasticities and choice
dichotomous (logit) model. The study revealed that palm
Kernel oil is price elastic but may not be a close
substitute to groundnut oil as a piriori expected since its
gross price elasticity is less than unity and negative.
Surprisingly, increase in consumer’s income will lead to
less than proportionate increase in demand for palm kernel
oil but gives a more than proportionate increase in the
demand for groundnut oil in the area. This makes Palm kernel
oil an inferior product when compared with groundnut oil
though the high cost of production has reduced the relative
competitiveness of the two edible oils of plant origin in
the state. At 10% significant level, there is the likelihood
that palm kernel oil will be preferred to groundnut oil when
its own price increases. The likelihood may decrease with
increase in consumers’ income. Similarly, at 5% significant
level, its preference may decrease with an increase in
consumers’ age and formal educational attainment. The
reasons may be high level of education and also may be due
to the fact that age exposes the low quality of Palm Kernel
oil and high risk of cardiovascular problems associated with
it than with groundnut oil. The study suggests that palm
kernel oil revenue can be increased if the product is sold
at a reduced market price while higher prices will favour
the revenue generated from groundnut oil. Palm Kernel oil
should be refined further to improve its taste, colour and
texture to enable it stand the competition posed by refined
groundnut oil in the area.
Key
words:
Palm kernel oil, groundnut oil, consumers’ preference and
demand elasticity.
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