The Effects Of Food Price Fluctuations On The Welfare Of The Urban Residents

The food industry is the basic industry of the whole national economy, and itsdevelopment put lots of influence to the other industries. In recent years, the fluctuation offood price caused the expansion of economy, led to the rising of living cost for urban residents,and finally had effect on the welfare of these people. At the same time, there are differentstructures of consumption for different income groups, in generally, the low-income group hasbeen easily influenced by food prices fluctuation than the middle-income group and thehigh-income group, the reason is that food expenditure accounts for more aggregateconsumption expenditure for these people who are in low-income group than others. So whenthe price of food rose by10%, how much welfare difference will be between the low-incomegroup and the high-income group? When the impacts of prices on low-income group are morethan its affordability, how the government and relevant departments react to support them?Therefore, this paper attempts to answer these questions by using the welfare model.In this paper, using the criteria for the classification of the National Bureau of Statistics,selecting three groups of urban households, that are low-income group, middle-income groupand high-income group, the proportion of each group are10%,20%and10%respectively;Meanwhile, by selecting food, vegetables and meat and poultry products as the researchobjects of this paper according to Grey Relational Theory, to analyze the income elasticity ofdemand,price elasticity of demand and Hicks demand elasticity for urban residents by themethods of the almost ideal demand system model(AIDS). On basis of the analysis, by usingMinot and Goletti’s model as reference, this paper measures the urban residents’ welfarechange that caused by food price change. This model is originally used to research the welfareeffects both in short-term and long-term run when agricultural product price changes, and tocompare the welfare effects for different income groups.The main conclusions of this paper are：1. there are remarkable negative relevantrelations between the price of foods and short-term welfare;2.Short-term per capita welfarereduces with the increase of income urban residents, that is the fluctuation of foods price haveeffects on the welfare of the low-income group more severely than the middle-income groupand the high-income group;3.The basic conclusion of Long-term welfare effects analysis isconsistent with low-term welfare effects;4.The fluctuation of foods prices have stronger Long-term welfare effects than low-term welfare effects to urban residents, however, thedifferences of effects between them is subtle.Based on the conclusion, for the people in low-income group, their per capita welfare ofhave been easily influenced by foods prices fluctuation, and they are more vulnerable thanothers. Therefore, it is very important for government and relevant departments to stabilizefoods prices, increase the supply of foods, strengthen the intensity of price subsidies andincrease disposable income to these low-income families.