Evaluation of a firm model in estimating aggregate supply response
The North Central Regional Research Project NC- 54, “Supply Response and Adjustments for Hog and Beef Cattle Production,” was started in 1961. The project statement lists these objectives:
(1) To estimate farm resource use and supply response of hogs and beef cattle in representative farm situations.
(2) To estimate total production of hogs and beef cattle and patterns of resource use for states in the North Central Region and for the nation.
(3) To determine the production situations and the areas in which a specified output of hogs and beef cattle would or could be produced most efficiently under various projected levels of demand and prices and at a given level of technology representing that now known but not yet generally adopted.
Linear-programming, time-series analysis, production function analysis and “outlook” research were used in the study. The linear-programming research was divided into two phases. Phase I involved (a) estimating the optimum organization and production for representative farms at various prices for hogs, cattle and feed grains and (b) aggregating these results to give estimates of regional production. The purpose of Phase II was to examine the effects of permitting acquisition and disposal of factors of production assumed fixed in the Phase I model. This was accomplished by including purchase and sale activities for fixed assets at predetermined prices. Insofar as the purchases and sales were not conducted within a framework of regional constraints and because an appropriate weighting scheme was not readily available, no aggregation of the Phase II results was made. Time-series analysis, production function analysis and “outlook” analysis were used to complement the programming analysis.