| Abstract: | This paper presents estimates of demand elasticities in Bulgaria using the Almost Ideal Demand system while using interval priors for the parameters. Expenditure elasticities are found to be considerably higher than unity for food items. These results are interpreted as being due to a substantial divergence between consumption and expenditure on food items. It is concluded that under conditions of falling incomes, policies which focus exclusively on food provision may not be appropriate. In the event of a return to income growth, an initial increase in demand for selected food items could outstrip the potential to increase domestic supply, and lead to an increase in imports, or decrease in exports, of a number of agricultural products. |
