Demand, Supply, and Price Relationships for the Beef Sector, Post-World War II Period

A simultaneous equation beef model which allows for simultaneity between supplies and demands is formulated and estimated. The supply of beef is partitioned into fed, domestic nonfed, and import components; the demand for beef is split into fed and nonfed components. The findings, which are comparable with those of several earlier studies as far as the price flexibilities of total demand and price elasticity of total supply are concerned, indicate that analysis have underestimated the income elasticity of demand for fed beef by focusing on all beef and overlooking the inferior income-demand relationship for nonfed beef. By use of these results, the depression in fed beef prices in the 1962–1964 period was found to have resulted largely from heavy supplies of fed beef and lack of commensurate growth in consumer purchasing power. The findings further indicate that Cochrane's aggregate analysis requires either more information than recognized or less aggregation than used before meaningful policy inferences can be made.