Abstract

An attempt has been made in this study to examine the supply response of mustard through cointegration and vector error correction approach. Augmented Dickey-Fuller (ADF) test indicates that all the variables considered have a unit root problem at level form and is stationary at differenced form for which all the data series are I(1). The trace statistic and maximum eign value tests confirm that there is at least one cointegrating vector. The short-run elasticity with respect to real mustard price is 0.1543 while in the long-run, the real mustard price elasticity is 0.5242. In the short-run impact of price fluctuation is very little or minimum. The mustard area is inelastic with respect to own price. Low short-run and long-run elasticities of supply indicate that mustard growers do not make considerable area adjustments in response to expected prices. Weather variable emerges as one of the important factors in determining the mustard area in the short-run. Due to low price elasticity, price policies will not be much effective in obtaining the desired level of mustard output.

Key words: Supply elasticity, mustard, vector error correction.