Modelling of the Demand Relations within the Commodity Chain: Application on the Wheat Commodity Chain in the Czech Republic

The paper is focused on formulation of demand relations in the commodity chain. Created model respects interdependence and interconnection of particular stages within the food commodity chain – it takes into account the fact that secondary demand function is formed not only by particular prices but also by level of demand on vertical previous market. The functions of primary consumer demand for final products and the functions of derived demands at the level of retail, processing and agricultural production are modeled. The wheat commodity chain in the Czech Republic is chosen for the application. Statistical verification of the model and derivation of standard characteristics of market subjects’ behaviour (elasticities) are made. The model shows that demand of consequential vertical stage significantly takes a share in the size of particular secondary demand, consumer demand for basic bakery products is price and income inelastic and there are weak cross price elasticities among consumption of basic bakery products.