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The Effects of Supply Shifts on Producers' Surplus: the Case of Inelastic Linear Supply Curves

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  • Karagiannis, Giannis
  • Furtan, William Hartley

Abstract

This paper derives sufficient conditions (in terms of supply and demand elasticities) for producers to gain under different supply shifts when supply and demand are specified to be linear functions and supply is inelastic. It is shown that regardless of the type of supply shift, producers lose whenever the sum of absolute values of supply and demand elasticities is less than one, while they gain when production takes place in the elastic portion of the demand. In all other cases arising from alternative elasticity configurations simple formulas developed in this paper may be used to determine the direction of change in producers surplus.

Suggested Citation

  • Karagiannis, Giannis & Furtan, William Hartley, 2002. "The Effects of Supply Shifts on Producers' Surplus: the Case of Inelastic Linear Supply Curves," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 3(1), pages 1-7, January.
    • Handle: RePEc:ags:aergaa:26430
    DOI: 10.22004/ag.econ.26430
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    References listed on IDEAS

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    1. Martin, Will & Alston, Julian M, 1997. "Producer Surplus without Apology? Evaluating Investments in R&D," The Economic Record, The Economic Society of Australia, vol. 73(221), pages 146-158, June.
    2. Will Martin & Julian M. Alston, 1997. "Producer Surplus without Apology? Evaluating Investments in RD," The Economic Record, The Economic Society of Australia, vol. 73(221), pages 146-158, June.
    3. Geoff W. Edwards & Jan P. Voon, 1997. "The Calculation of Research Benefits with Linear and Nonlinear Specifications of Demand and Supply: Reply," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(4), pages 1368-1371.
    4. Elamin H. Elbasha, 1997. "The Calculation of Research Benefits with Linear and Nonlinear Specifications of Demand and Supply: Comment," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(4), pages 1363-1367.
    5. Gay Y. Miller & Joseph M. Rosenblatt & Leroy J. Hushak, 1988. "The Effects of Supply Shifts on Producers' Surplus," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 70(4), pages 886-891.
    6. Jan P. Voon & Geoff W. Edwards, 1991. "The Calculation of Research Benefits with Linear and Nonlinear Specifications of Demand and Supply Functions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(2), pages 415-420.
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    Cited by:

    1. Desquilbet, Marion & Dorin, Bruno & Couvet, Denis, 2013. "Land sharing vs. land sparing for biodiversity: How agricultural markets make the difference," TSE Working Papers 13-435, Toulouse School of Economics (TSE), revised Oct 2015.
    2. Marion Desquilbet & Bruno Dorin & Denis Couvet, 2016. "Land Sharing vs Land Sparing to Conserve Biodiversity: How Agricultural Markets Make the Difference [land-sharing/land-sparing, comment les marchés font la différence]," Post-Print hal-03948463, HAL.
    3. Karls, Michael A. & Horowitz, John B. & Sesmero, Juan & Van Cott, T. norman, 2013. "Innovation, Parallel Shifts of Supply, and Welfare," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 14(1), pages 1-8.
    4. Twine, Edgar & Katjiuongua, Hikuepi, 2015. "Farm-Level and Consumption Responses to Improved Efficiency of Tanzania’s Informal Dairy Value Chain," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 200329, Agricultural and Applied Economics Association.
    5. John B. Horowitz & Michael A. Karls & Juan Sesmero & T. Norman Van Cott, 2023. "Beyond Simple Profit Maximization in Uncertain Markets: How Innovation and Entry Change Supply Curves and Producer Surplus," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 38(Summer 20), pages 55-77.

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