The Estimation of Functions of Supply and Demand forWriting & Printing Paper in Iran

In this study utilizing the time series data for the period from 1981 to 2006 and applying OLS procedure as well as Eviews software, supply and demand functions of writing and printing paper is estimated as single-equation regression models. In such situation, it is possible to identify the explanatory variables related to production and consumption of wood and paper and help factories to determine the production capacity with respect to domestic demand. In addition, if it is necessary, such finding will help government to allocate the necessary currency for imports of this product. The reason for using this procedure is based on the hypothesis that linear classical regression models can be used as estimators in unbiased condition and possesses the least variance (BLUE). The applied model uses the functional form as linear log-log model which permits the interpretation of estimated coefficient in terms of elasticities. The results of demand function with assumption of lack of serial autocorrelation between residual terms of different equations at 0.05 statistical levels indicate that intercept, newspaper price as a substitute commodity, literacy rate and production rate of wood and paper variables imposes positive effect and wood and paper price variable has slightly negative effect on its consumption. Since absolute price elasticity estimate is less than one, it shows that demand for wood and paper is inelastic. The war dummy variable is significant at 0.05 level that shows it influences the wood and paper consumption. The results of supply function with the similar assumption indicate that wood and paper price is newspaper price as a substitute commodity. Wood and paper consumption with the first lagged have positive effect and intercept, wood and paper imports and production cost with the first lagged have negative effect on its production. The war dummy variable imposes positive effect on wood and paper production at 0.05 level.