Consequences of Demand for Import of Industrial Commodities in Iran

This paper aims to estimate the demand for import of nine industrial groups in Iran as a function of income and price elasticity. Having price and income elasticity of different industrial groups is in fact a prerequisite for this study. According to the economic literature on demand estimation, the authors utilize the Almost Ideal Demand System (AIDS) in order to provide expected results. The obtained results show that the overall price elasticity of each industrial group conforms to the expected results of Iran’s total industrial sector. The price elasticity of four industries exceeds one unit. In other words, in these four industrial groups, with each unit increase (decrease) in price, the demand for these industrial goods decreases (increases) by more than one unit. But in the other five industrial groups, the price elasticity is less than one unit. Income elasticity is positive in all of the nine industrial groups: income elasticity in three industrial groups is more than one (signifying that these are luxury goods), while it is less than one in the other six industrial groups (signifying that these are necessity goods). The price and income elasticity are also calculated on the basis of origin of goods that in some cases illustrates differing results from the general trends observed.