Price-supply flexibility of wheat market in the Czech Republic

Abstract

The paper explores of the price-supply flexibility of the Czech commodity market for food quality wheat in the period 1995–2011. For this analysis, inversion definition of the supply function was applied. The model of the inverse supply function in the Czech wheat market was based on the double log-linear construction. The parameters of the given supply model were estimated using OLS-HAC method. The developed regression model of the supply function was statistically tested. Ordinary and dynamic price flexibility of the wheat supply on the Czech commodity market was determined in relation to the parameters of the developed econometric model. In accordance with the estimations, the ordinary price-supply flexibility achieved +0.3492% and the dynamic price-supply flexibility of the first order was –0.2210%. Within the interpretation of both estimated coefficients of the price-supply flexibility, the multi-factor nature of the commodity supply function must be respected. Moreover, it is important to distinguish the short-term and long-term period within the evaluation of the price-supply flexibility.