Short-run and long-run demand elasticity of shallot in North Sumatera Province

Abstract

Shallot is one of the leading horticultural commodities from the seasonal vegetable group in Indonesia. Of all the total harvested area of the seasonal vegetable crops in Indonesia, the largest is used to produce shallots. The increase in demand for shallot because of population growth and increase in income, as well as the domestic production of shallot which cannot meet the high needs for shallot, results in imbalance condition in shallot market and thus push price up. The autoregressive model adapted from Nerlove partial adjustment model and multiple linear regression analysis with the estimation technique of Ordinary Least Square (OLS) were used to analyse the factors affecting the demand for shallot and estimate the demand elasticity to the price of shallot in North Sumatera. The results showed that the consumer price of shallot, the consumer price of garlic, and the population of North Sumatera have a positive effect on the demand for shallot, while the GDP per capita of North Sumatera and the demand for shallot in the previous period have a negative effect on the demand for shallot in North Sumatera. Demand elasticity of shallot in North Sumatera is inelastic, both in the short-run and the long-run.