An econometric model of the sawn timber market in Australia
1993
Bigsby, H.R. (Melbourne Univ., Parkville (Australia). Faculty of Agriculture and Forestry)
Price elasticities for demand and supple of sawn timber in Australia were estimated. The price elasticity of demand was based on a composite price calculated as a weighted average of a domestic sawn timber, dressed imports, and rough softwood and hardwood imports. The use of a composite price overcomes problems encountered in earlier studies where demand price elasticities were found to be insignificant. The demand price elasticity found in the study is minus 0.783. This indicates that demand is inelastic, or that a given percentage change in price will cause a smaller percentage change in demand. Sawn timber demand is thus found to be somewhat resistant to changes in prices. The supply elasticity for domestic production of sawn timber is 1.504, indicating that supply is elastic, or that a given percentage change in price will cause a larger percentage change in supply. Sawn timber supply is thus found to be very responsive to changes in prices. The results of the model also indicate that the Australian sawn timber market is structured such that domestic and imported timber operate in market niches. Since demand for each of the various timber types found in the model does not respond to changes in each other's prices, this indicates that market niches exist where domestic and imported timbers do not compete, or that if market competition occurs, it is not on the basis of price.
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