Specification of Supplies and Demands For Subsector and Submarket Studies*

David H. Harrington

Journal of Agricultural and Applied Economics, 1972, vol. 4, issue 1, 151-156

Abstract: 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.

Date: 1972
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