Functions of Wheat Supply and Demand in Saudi Arabia

The primary purpose of this paper is comparing six common models, which were linear, quadratic, Cobb-Douglas, translog, logarithmic, and transcendental, to estimate the supply and demand functions for Saudi Arabian wheat. In addition to estimating the market equilibrium for price and quantity, that led to identifying consumer and producer surplus. Data cover 1990-2014 for all the variables that used to show the effect supply and demand of Wheat. After testing the models using Stepwise and Box-Cox, we came up with the fact that the linear and Cobb-Douglas methods were the best models to show the relationship between variables. On the supply side, we found using the linear model, that wheat price had a negative sign, which represents the impact of government policy number 335. However, in the Cobb-Douglas model, the wheat price had a positive sign. The elasticity coefficient of supply for the wheat price was inelastic. Moreover, the result also showed that all the elasticity coefficients in the supply and demand models were inelastic. The low-income elasticity of demand led the consumption of wheat to increase.