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IRREVERSIBLE SUPPLY FUNCTIONS REVISITED
Author(s) -
Burton M. P.
Publication year - 1988
Publication title -
journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.157
H-Index - 61
eISSN - 1477-9552
pISSN - 0021-857X
DOI - 10.1111/j.1477-9552.1988.tb00566.x
Subject(s) - economics , partial equilibrium , elasticity (physics) , econometrics , capacity utilization , short run , supply side , microeconomics , mathematical economics , thermodynamics , general equilibrium theory , physics
This paper presents a successful application of an irreversible supply model to the UK egg sector. The model has been developed to overcome the problems that the conventional approaches to irreversible supply modelling face when used with a partial adjustment framework. The results indicate that the supply response to price changes under excess capacity is less than a third of that under non‐excess capacity, but that the long‐run response is symmetric, as required by the underlying theory. Furthermore, the long‐run elasticity from a conventional, symmetric, partial‐adjustment model is some 40% larger than that of the asymmetric model, implying that the importance of the asymmetric specification extends beyond an interest in the short‐run adjustment path.