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Analysis Of Projects With Price Effects, And Application To Innovation And Technical Change

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  • Oehmke, James F.
  • Crawford, Eric W.

Abstract

This paper provides an introduction to benefit-cost analysis of projects with price effects, intended for use in teaching. The impact of price changes on consumers' and producers' surplus under competitive market assumptions is presented graphically with linked numerical examples. The effect of demand and supply shifts on social surplus is then discussed, distinguishing the shift effect holding price constant from the price effects themselves. The distribution of gains and losses to consumers and producers is also evaluated. The analysis is then extended to include distortions such as price supports and ceiling prices. Applications to the evaluation of agricultural research impacts are then introduced, drawing on recent literature. An illustrative exercise based on maize research in Zambia is included.

Suggested Citation

  • Oehmke, James F. & Crawford, Eric W., 2004. "Analysis Of Projects With Price Effects, And Application To Innovation And Technical Change," Staff Paper Series 11766, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    • Handle: RePEc:ags:midasp:11766
    DOI: 10.22004/ag.econ.11766
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    File URL: https://ageconsearch.umn.edu/record/11766/files/sp04-02.pdf
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    References listed on IDEAS

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    1. Masakatsu Akino & Yujiro Hayami, 1975. "Efficiency and Equity in Public Research: Rice Breeding in Japan's Economic Development: Reply," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 57(4), pages 734-735.
    2. Oehmke, James F., 1988. "The calculation of returns to research in distorted markets," Agricultural Economics, Blackwell, vol. 2(4), pages 291-302, December.
    3. Sugden, Robert & Williams, Alan, 1978. "The Principles of Practical Cost-Benefit Analysis," OUP Catalogue, Oxford University Press, number 9780198770411.
    4. James F. Oehmke, 1988. "The Calculation of Returns to Research in Distorted Markets," Agricultural Economics, International Association of Agricultural Economists, vol. 2(4), pages 291-302, December.
    5. Masakatsu Akino & Yujiro Hayami, 1975. "Efficiency and Equity in Public Research: Rice Breeding in Japan's Economic Development," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 57(1), pages 1-10.
    6. James F. Oehmke & Eric W. Crawford, 2002. "The Sensitivity of Returns to Research Calculations to Supply Elasticity," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(2), pages 366-369.
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