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Price elasticities, joint products, and international trade

Author

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  • Piggott, Nicholas E.
  • Wohlgenant, Michael K.

Abstract

This paper extends the basic results of Houck’s insight for derived demand elasticities for the case of joint products by allowing for the possibility of the joint and raw products being traded. Theoretical relationships between individual demands for a set of jointly-produced commodities that are traded and composite demand for the raw product from which the joint products originate are derived. It is shown that while the derived price elasticity of domestic demand retains the same form as Houck’s original formula, the relevant price elasticities of demand to include in the formula are elasticities of total demand instead of domestic demand elasticities. Using the USA soybean industry as an example, this generalised formula that takes into account trade is implemented to calculate the elasticity of total demand for USA soybeans. The usefulness of this formula for policy-makers to trace out the impacts of changes in market conditions and trade policy in the joint-products, and how it will impact the price elasticity of domestic and total demand for the raw product, is demonstrated.

Suggested Citation

  • Piggott, Nicholas E. & Wohlgenant, Michael K., 2002. "Price elasticities, joint products, and international trade," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 46(4), December.
  • Handle: RePEc:ags:aareaj:118592
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    File URL: http://purl.umn.edu/118592
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    Citations

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    Cited by:

    1. Chen, Wei & Marchant, Mary A. & Song, Baohui, 2009. "Impacts of China's Food Consumption on U.S. Soybean Exports," 2009 Annual Meeting, January 31-February 3, 2009, Atlanta, Georgia 46820, Southern Agricultural Economics Association.
    2. Zhu, Xiaohong, 2016. "New models to estimate costs of US farm programs," ISU General Staff Papers 201601010800006209, Iowa State University, Department of Economics.
    3. Zhu, Xiaohong, 2016. "New models to estimate costs of US farm programs," ISU General Staff Papers 3547, Iowa State University, Department of Economics.
    4. repec:oup:ajagec:v:99:y:2017:i:5:p:1117-1142. is not listed on IDEAS
    5. Zhang, Dengjun & Asche, Frank & Oglend, Atle, 2014. "Ethanol and trade: An analysis of price transmission in the US market," Energy Economics, Elsevier, vol. 42(C), pages 1-8.
    6. GianCarlo Moschini & Harvey Lapan & Hyunseok Kim, 2017. "The Renewable Fuel Standard in Competitive Equilibrium: Market and Welfare Effects," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 99(5), pages 1117-1142.
    7. Drabik, Dusan & de Gorter, Harry & Timilsina, Govinda R., 2014. "The effect of biodiesel policies on world biodiesel and oilseed prices," Energy Economics, Elsevier, vol. 44(C), pages 80-88.
    8. Kim, C.S. & Schaible, Glenn D. & Garrett, Lynn & Lubowski, Ruben N. & Lee, Donna J., 2008. "Economic Impacts of the U.S. Soybean Aphid Infestation: A Multi-Regional Competitive Dynamic Analysis," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 37(2), October.
    9. Shastitko, Andrey & Shastitko, Anastasia, 2015. "Markets of joint products: A theoretical model and policy implications," Russian Journal of Economics, Elsevier, vol. 1(2), pages 199-216.
    10. MacDonald, Stephen, 2012. "Economic Policy and Cotton in Uzbekistan," MPRA Paper 70882, University Library of Munich, Germany.

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