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Specification of Supplies and Demands For Subsector and Submarket Studies*

Published online by Cambridge University Press:  28 April 2015

David H. Harrington
David H. Harrington*
Affiliation:
Farm Production Economics Division, Economic Research Service, USDA, Purdue University, Lafayette
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Extract

Regional supply-adjustment studies are either underway or completed for milk, feed grain-livestock, wheat, rice, cotton, and beef. Other related studies take subsectors as units of analysis for studying markets for such inputs as labor and fertilizer, or for studying regional comparative advantage.

This paper reviews the specification of supply and demand for both kinds of studies and develops the concept of effective subsectoral demands and supplies from the standard Walrasian adjustment behavioral assumptions. These concepts are applied to both the input markets and the product markets. Two commonly used specifications of subsectoral functions: (1) the method of equal elasticity as the aggregate, and (2) the method of equal slope as the aggregate, are found to be incorrect specifications of subsectoral functions in perfectly competitive adjustment studies, except in very restrictive circumstances. The theoretically consistent specifications are developed and shown to be operationally useable for future studies.

Type
Research Article
Information
Journal of Agricultural and Applied Economics , Volume 4 , Issue 1 , July 1972 , pp. 151 - 156
Copyright
Copyright © Southern Agricultural Economics Association 1972

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Footnotes

*

Purdue University Agr. Exp. Sta. Journal Paper No. 4664

References

[1]Friedman, M., Price Theory: A Provisional Text, Chicago: Aldine, 1962.Google Scholar
[2]Harrington, David H., Irwin, G. D., and Kehrberg, E. W., “Product Demands and Input Supplies for a Sub sector-Decomposing Aggregate Estimates,” manuscript in process.Google Scholar
[3]Henderson, J. M. and Quandt, R. E.,Microeconomic Theory, New York: McGraw-Hill, 1958.Google Scholar
[4]Leftwich, R. H., The Price System and Resource Allocation, New York: Holt, Rinehart and Winston, 1961.Google Scholar
[5]Plessner, Y., “Computing Equilibrium Solutions for Imperfectly Competitive Markets,” American Journal of Agricultural Economics, 53: 2: 191–196, May 1971.CrossRefGoogle Scholar