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Some Practical Issues in Economic Surplus Measurement in Multi-Market Models

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  • Zhao, Xueyan
  • Mullen, John D.
  • Griffith, Garry R.

Abstract

Despite continuing controversy, economic surplus has continued to be used in empirical cost-benefit analyses as a measure of welfare to producers and consumers. In this paper, the issue of measuring changes in producer and consumer surplus resulting from exogenous supply or demand shifts in multi-market models is examined using a two-input and two-output equilibrium displacement model. When markets are related through both demand and supply, significant errors are possible when using conventional economic surplus areas incorrectly as is evident in some applications in the literature.

Suggested Citation

  • Zhao, Xueyan & Mullen, John D. & Griffith, Garry R., 2001. "Some Practical Issues in Economic Surplus Measurement in Multi-Market Models," 2001 Conference (45th), January 23-25, 2001, Adelaide, Australia 126067, Australian Agricultural and Resource Economics Society.
    • Handle: RePEc:ags:aare01:126067
    DOI: 10.22004/ag.econ.126067
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    References listed on IDEAS

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    1. Jeffrey T. LaFrance, 1991. "Consumer's Surplus versus Compensating Variation Revisited," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(5), pages 1496-1507.
    2. Xueyan Zhao & John D. Mullen & Gary R. Griffith, 1997. "Functional Forms, Exogenous Shifts, and Economic Surplus Changes," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(4), pages 1243-1251.
    3. John D. Mullen & Michael K. Wohlgenant & Donald E. Farris, 1988. "Input Substitution and the Distribution of Surplus Gains from Lower U.S. Beef-Processing Costs," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 70(2), pages 245-254.
    4. Will J. Martin & Julian M. Alston, 1994. "A Dual Approach to Evaluating Research Benefits in the Presence of Trade Distortions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 76(1), pages 26-35.
    5. Roley R. Piggott & Nicholas E. Piggott & Vic E. Wright, 1995. "Approximating Farm-Level Returns to Incremental Advertising Expenditure: Methods and an Application to the Australian Meat Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(3), pages 497-511.
    6. Hausman, Jerry A, 1981. "Exact Consumer's Surplus and Deadweight Loss," American Economic Review, American Economic Association, vol. 71(4), pages 662-676, September.
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    Cited by:

    1. Dent, Siobahn K. & Piggott, Roley R. & O'Donnell, Christopher J. & Griffith, Garry R., 2003. "Does Excluding Cross-commodity Interactions Matter? Beef and Lamb in Australia," 2003 Conference (47th), February 12-14, 2003, Fremantle, Australia 57859, Australian Agricultural and Resource Economics Society.
    2. Mounter, Stuart W. & Griffith, Garry R. & Piggott, Roley R., 2005. "The Payoff from Generic Advertising by the Australian Pig Industry in the Presence of Trade," Australasian Agribusiness Review, University of Melbourne, Department of Agriculture and Food Systems, vol. 13.
    3. X. Zhao & J.D. Mullen & G.R. Griffith & R.R. Piggott & W.E. Griffiths, 2002. "The Economic Incidence of R&D and Promotion Investments in the Australian Beef Industry," Monash Econometrics and Business Statistics Working Papers 16/02, Monash University, Department of Econometrics and Business Statistics.

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