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ExcessElast - Excess Supply and Demand Elasticities or...

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1 Excess Supply and Demand Elasticities or Trade Elasticities The excess functions derived in the three or four panel diagrams have underlying mathematical relationships which allow the derivation of elasticities for use in intrafirm decisions and public policy making. An initial identity is developed, to which is added sets of behavioral equations. To simplify the derivation of excess demand and supply elasticities, it is assumed that carry-over between years does not exist. (1) S w / D w where S W and D W are world supply and demand, respectively. With open markets, supply and demand for any one nation will differ only by the amount traded, so: (2) S A +M A / D A +X A where M and X represent imports and exports, respectively, for country A. The left-hand side is. If countries total availability and the right-hand side is total disappearance. These identities will always hold as market clearing conditions are allowed to trade and the excess supply and demand relationships are derived, then: (3) S A -D A / X A -M A / M
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