Study the Effects of Subsidy and Rice Import Policies on the Social Welfare Using Multi Market Supply and Demand Frame

Rice as essential goods is a second main family’s consumption after bread. The aim of this study is estimate the rice supply and demand function in Iran and determination of price and quantity equilibrium in separate two market (retail and wholesale) using simultaneous equation system. Also variation of consumer surplus, producer surplus and social welfare has been investigated for two policies of government subsidies and rice import. The Results showed that price elasticity and income elasticity of rice retail demand are negative and positive, respectively which the both value are less than one and represent that the rice is a normal and necessary goods. Results about welfare showed that social welfare and consumer surplus with subsidies payment are increased. Also, variation of social welfare and consumer surplus are increased with implementing the rice import policy in wholesale market, but producer surplus is decreased. Therefore this study suggested that the government and farmers increase the rice production using the modern technology for attainment self-sufficiency in rice production.