Supply Response of Horticultural Crops: The Case of Apple and Pear in Jammu & Kashmir

Abstract

The apple and pear have a significant place in the horticulture sector of Jammu & Kashmir. The planted areas have been expanding quiet significantly since 1990s. Advanced technologies for these crops have been rationalized and adopted by the growers; however, seasonal and annual variations of the fruit supplies continue to characterize prices at both wholesale and consumption levels. In this study, Nerlovian model has been used to estimate supply response, Engle- Granger test and Vector Error Correction Model have been used to estimate the long-run and short-run dynamics. The study has revealed that the price of apple has more variation compared to price of pear. The existence of correlation between the prices of apple and pear suggests that there exist both long-run and short-run relationships between the prices of these commodities. The results have exhibited a high value of R2 (95%) and estimated own price elasticities of 0.32 and 0.33 in apple and 0.03 and 0.28 in pear, respectively in short- and long-run. The results have further revealed that the price of pear has a positive and significant impact on price of apple, as demonstrated by their respective coefficients. The study has concluded that if price of apple increases, people can opt for pear which has turned out to be an alternative crop.