Analysis of factors affecting demand for urea in Java, Indonesia
1985
Alwi, I.
This study is an analysis of factors affecting demand for urea fertilizer in Java, Indonesia. The quantity of urea demanded is specified as a function of urea-rice price ratio and physical factors affecting response to urea. Urea demand function was estimated for each province by applying Ordinary Least Squares estimation technique (OLS). The analysis covered the period 1974-1981. The purpose of the analysis was to identify factors affecting demand for urea fertilizer by farmers in order to increase rice production. The study found that the price of urea relative to rice price was a dominant factor affecting demand for urea. The value of the estimated price ratio elasticity was -0.87, meaning that at 1% decreased in price ratio, the quantity demanded for urea would increase by 0.87 percent other things remain constant. That is, any changes in the price of urea of rice would affect urea consumption. Apparently, the fixed subsidized price of urea by the government; accompanied by the annual increase in the price of rice induced the farmers to use more urea fertilizer. Other factors affecting urea consumption were : season and irrigatio
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