Research on the optimal replacement problem has emphasized specification of the theoretically appropriate criterion. Today, the most commonly applied replacement decision theory for machinery assumes that the owner will replace each older machine, “defender,” with an identical new machine, “challenger,” in accordance with long-run cost minimizing or profit maximizing criteria (i.e., wealth maximization). Perrin (p. 60) summarizes the cost minimization criterion which should be applied: “A machine should be kept another period if the marginal costs of retaining it … are less than the ‘average’ periodic costs of a replacement machine.” As Chisholm noted, this criterion is “deceptively simple.” Support for Chisholm's observation is evidenced throughout the literature, because acceptance and use of an appropriate criterion has come about slowly.

Classical theory of consumer demand postulates that each consumer possesses a continuous utility function. The theory describes the behavior of a rational consumer such that the consumer's preferences for various sets of goods are given and the consumer purchases a set of goods which maximizes utility function subject to the budget constraint that total expenditure is equal to income.

There has been persistent interest in the issues relating to farm size and survival of family farms since the beginning of agricultural economics as a discipline. Since the early 1950s, the number of farms has been decreasing and the average farm size has been increasing.

The relevance of macroeconomic theory to the analysis of economic behavior in the agricultural sector is a recurring theme in applied research in this area. On the one hand, it is possible to find the view that the agricultural sector should be treated in isolation as an independent market or set of markets not subject to the influences of changes in monetary and fiscal policy or (other) changes in aggregate demand and supply. On the other hand, it is also possible to find literal acceptance of the usefulness of macroeconomics—perhaps in the form of a particular version of the theory—with the controversial part surfacing in the particular view of macroeconomics and how it bears on (and is influenced by) agricultural markets. The fact that this dichotomy exists is highlighted by the contrasting views expressed recently by Breimyer (1981) and Tweeten. At the same time that Breimyer advocated that “macro-economics should be struck from the lexicon,” Tweeten chose to devote his AAEA Presidential address to a discussion of the implications of current developments in macroeconomic theory and policy for the agricultural sector; his particular emphasis is on the important role of “supply-side” macroeconomics.

The distribution of coupons offering customers a reduction in the regular purchase price has become an important element of the marketing strategy for many consumer package goods and services. The distribution of manufacturers' cents-off coupons has increased from an estimated 35.7 billion coupons in 1975, to 90.6 billion coupons in 1980, representing an increase of more than 150 percent. In addition, there has been an upward trend in percent of households using coupons, from 65 percent in 1975, to 76 percent in 1980. More than 95 percent of the coupon users bought food items with them in 1980 (A. C. Nielsen Company).

The Food Stamp Program (FSP) began in 1939 on a limited basis. In 1961, President Kennedy created an experimental Food Stamp Program that became nationwide after enactment of the Food Stamp Act of 1964. The two main purposes of the FSP are to improve the nutritional status of low income families and to support farm income by increasing food demand. The cost of the FSP rose from $1.8 billion in 1972, to $6.9 billion in 1979. This dramatic increase has motivated a considerable research effort to evaluate the program. This research can be classified into three broad categories (that are not necessarily mutually exclusive).

One of the chief complaints against the federal tobacco program is that it sets prices too high relative to foreign tobaccos: most foreign burley tobaccos are priced between one-third and one-half the price of U.S. burley. Critics feel that if the government program were changed so that burley production could increase, prices would be lower, and more burley tobacco would be consumed. Production increases could bring about two beneficial effects. First, U.S. burley tobacco would be more competitive in overseas markets, and, therefore, exports could increase. Second, U.S. imports of foreign burley could decrease. This study examines the validity of the first argument; its main objective is to evaluate the elasticity of demand for U.S. burley tobacco in European markets. Of course, the more price elastic is the demand for U.S. burley in these European markets, the more exports will expand if U.S. prices are lowered. Evidence is also provided on the growth potential of these foreign markets.

An efficient market has been described by Fama (1970) as one in which prices always fully reflect all available information. Of the three tests of efficiency discussed, the weak form test is concerned with the randomness of price movements and measures the ability to predict future price changes from past and present changes. There are two general ways to evaluate weak form efficiency: statistical tests and mechanical trading rules. Statistical methods, including serial correlation, spectral analysis and nonparametric runs tests, permit hypothesis testing, but Fama and Blume (p. 227) point out that they may be of limited value with complex or irregular price structures.

It has been conjectured that elimination of the U.S. peanut program would have a profound impact on the supply of fresh produce grown in the peanut producing area of Georgia. Awareness regarding this possibility was brought to bear for two reasons: a) the nature of peanut legislation in 1977 and subsequent years has created a great deal of speculation concerning the possible elimination or phasing out of the program and b) fresh vegetables and fruits produced for the national market and peanuts under the peanut program represent high value crops.