2120 final report.pdf - Agra CEAS Consulting

APPENDIX 2: THIRD COUNTRIESA3.4.1. Domestic producer surplus change for exogenous factor suppliesFollowing an exogenous demand shock in the model to one market, demand curves shiftendogenously via demand interaction with other markets in the model which in turn produces achange in prices and quantities. However, the surplus curve remains fixed such that producersurplus can be measured. Zhao et al. (2000a) detail how to derive producer surplus changes in thiscontext. Given the similarities between the model structure here and that in Zhao et al., it can beverified that the following are the appropriate measures of producer surplus for each of the factorinputs.PSX1 W1X1( EW1 tX 1)(1 0.5EX1)PS X 2 W 2X2( EW 2 tX 2)(1 0.5EX2)PS X 3 W 3X3( EW 3 tX 3)(1 0.5EX3)The associated shift in X 1 , X 2 and X 3 is given by t X1 , t X2 and t X3 which we take to be a percentage shiftfrom the initial price, W 1 , W 2 or W 3 . So a 1% percentage change in X 1 requires t X1 to be set equal to0.01. Finally, for ease of notation in relation to model computationPSX 1 PSX 2 PSX 3 ESA3.4.2. Domestic consumer surplus changesOur three domestic markets for eggs are related in both demand and supply. For domesticconsumers there is some degree of substitution between caged shell, processed and alternative shelleggs, although this is likely to be asymmetric. That is, processed demand can be satisfied by eitherprocessing supply, or shell caged or alternative. Whereas, shell caged can only really be supplied byshell caged and shell alternative. There can only be minimal substitution from the processed supplythat will require changes to grading or quality of production.In this context there are two methods by which consumer surplus can be measured. The first is toemploy a measure of consumer surplus via a change in total surplus (ΔTS) from a general equilibriumcurve in a single market. We can estimate surplus to domestic consumers in this case by taking thedifference between ΔTS and the sum of all other surplus estimates (Zhao et al., 2000a). In this casethe measure of consumer surplus change for domestic consumers is calculated for all policy scenariosasCS Qd TS ESFor several of the policy scenarios we consider domestic consumer surplus and this requires that weestimate a different measure of TS as follows.413