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Many studies of food demand do not use actual prices but unit values, obtained by dividing expenditures by the quantity consumed. This can bias empirical analyses because unit values are not exogenous market prices; they reflect household food quality choices within each food category. This article develops a framework for assessing the resulting bias in income and price elasticities of demand and applies the framework to data for rural China. Empirical results indicate that households in rural China tend to consume higher-quality food as income increases, with a greater sensitivity to income for basic foods than for luxury foods. Copyright 2009, Oxford University Press.

We conducted a meta‐analysis of food and agricultural demand elasticities for China, and used the results to derive estimates of income, own‐price, and cross‐price elasticities of demand that can be used in models of food and agricultural markets. Consistent with expectations, we find that income elasticities of demand for many food products decline as per capita income increases. The declines are relatively large for alcohol and tobacco, and smaller for livestock products. Contrary to expectations, own‐price elasticities for some products become more price‐elastic as per capita income increases. One explanation may be that economic development brings with it improvements in food supply chains that provide people more choices with respect to food products than those traditionally consumed in rural villages, leading to greater substitution possibilities and more price‐elastic demands. Estimates for 2011 of income and own‐price demand elasticities are generally reasonable, whereas deriving reliable estimates of cross‐price elasticities is difficult. The estimates suggest that China's meat and dairy demands, and in turn livestock feed demands, will continue growing strongly. Policy‐makers should continue to monitor the evolution of demand for these products with an eye toward ensuring food security, particularly given the sheer size of the population and relatively tight domestic food supply situation in China.

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