will also be included in the analysis. The model focuses on increases in demand for
fruits and vegetables by California; however, the impact on agricultural industries in
other major fruit and vegetable producing states is incorporated into the analysis. The
complete mathematical model is in the Appendix. Equilibrium displacement models
have been widely used to estimate the benefits of agricultural research (Alston, Norton
and Pardey 1995), agricultural policies (Sumner and Lee 1997) and the benefits to the
dairy industry of a social marketing program to middle school children (Alston,
Chalfant and James 1999).
The advantage of simulating an equilibrium displacement model is that it does not
require estimating the underlying demand curves. The supply and demand functions
are log-linear approximations to the underlying curves. For small changes in demand
they provide estimates of surplus changes that are a close approximation to the actual
values (Alston, Norton and Pardey 1995). Another advantage is that it can be estimated
with readily available information (Alston, Norton and Pardey 1995).
The main disadvantage is that the larger the shock to the system, the more biased
is the estimate of surplus changes. However, this is true for any model where the
demand curve is an approximation.
The demand equations take into account the shift in demand to eating more fruits
and vegetables and consumer responsiveness to prices. The supply equations take into
account all sources of supply, including imports, exports, and domestic production, and
grower responsiveness to price changes. The equations also model the changes in
resource use for inputs such as land, labor and other purchased inputs.