Estimating Demand Functions of Production and Supply Inputs for Potato: A Case Study of Khorasan Province

Potato is one of products with too much fluctuations in price and production. As the most significant food of a high value after wheat and rice, it accounts for a main foodstuff of the people in third world countries and may quite well be an alternative for certain food products. Given the contribution of such a product in the economic development process, improved pupulation nutrition, high incomes for producers, increased capital investment, and employment in production, industry and associated products as well as considering a growing increase in world population and a further more need for optimal use of products and productive inputs, it seems quite necessary to review demanded inputs in cropping potatoes and the concerned supply function. This study aims to estimate simultaneously the functions of profit, product supply and input demand as well as demand elasticity of production and supply inputs for potatoes in the cropping year of 2002-3. The study has drawn upon a normative translog cost function for the estimation of supply and demand functions for the potato inputs in the province of Khorasan; and in order to give a simultaneous estimation of this system of equations, it has made use of a seemingly unrelated regression model. The results indicate that the price elasticity of input demand give a negative sign, and chemical fertilizers and improved seeds show elasticity. Cross demand elasticities show a complementary relation between fertilizers and machinery, and fertilizers and labor force as well as a substitution relation between labor force and improved seeds. Moreover, the input demand elasticities to the yield prices are positive, and yield supply elasticities to the input prices are negative and greater than one, with the exception of the improved seeds, indicating a high sensitivity of potato cultivators to the price fluctuations.