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Welfare Implications of Equilibrium Supply and Demand Curves in an Open Economy

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  • David S. Bullock

Abstract

Line integral theory is used to prove that in a closed economy the net domestic social welfare effects of a market distortion can be captured in the distorted market alone by using equilibrium supply and demand curves. Considerable confusion exists in the applied literature about the proper application of this proposition. It is shown that the proposition does not generally hold for open economies. It is shown that in general neither geometric areas behind equilibrium supply curves nor geometric areas behind equilibrium demand curves have any welfare significance.

Suggested Citation

  • David S. Bullock, 1993. "Welfare Implications of Equilibrium Supply and Demand Curves in an Open Economy," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 75(1), pages 52-58.
    • Handle: RePEc:oup:ajagec:v:75:y:1993:i:1:p:52-58.
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    Cited by:

    1. Bullock, David S. & Salhofer, Klaus, 2003. "Judging agricultural policies: a survey," Agricultural Economics, Blackwell, vol. 28(3), pages 225-243, May.
    2. Jean-Paul Chavas & Thomas L. Cox, 1997. "On Market Equilibrium Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(2), pages 500-513.
    3. Dietrich Earnhart & Sarah Jacobson & Yusuke Kuwayama & Richard T. Woodward, 2023. "Discretionary Exemptions from Environmental Regulation: Flexibility for Good or for Ill," Land Economics, University of Wisconsin Press, vol. 99(2), pages 203-221.
    4. Jean Paul CHAVAS & Thomas L. COX, 1996. "Abstract Of On Market Equilibrium Analysis," Staff Papers 393, University of Wisconsin Madison, AAE.
    5. George C. Davis, 1999. "The science and art of promotion evaluation," Agribusiness, John Wiley & Sons, Ltd., vol. 15(4), pages 465-483.
    6. Canning, Patrick N. & Vroomen, Harry, 1994. "Welfare Impacts of a Trade Restriction: An Equilibrium Approach and Application in the Potash Industry," Technical Bulletins 156762, United States Department of Agriculture, Economic Research Service.
    7. Bullock, David S. & Dadakas, Dimitrios & Katranidis, Stelios D., 2009. "Measuring the Effects of Technology Change in Multiple Markets : Application to the Greek Cotton Yarn Industry," MPRA Paper 67204, University Library of Munich, Germany, revised 2012.
    8. David S. Bullock & Klaus Salhofer & Jukka Kola, 1999. "The Normative Analysis of Agricultural Policy: A General Framework and Review," Journal of Agricultural Economics, Wiley Blackwell, vol. 50(3), pages 512-535, September.

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