i
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amount of credit per hectare which can be obtained from the FFA and
the crop associations is limited. The maximum that can be borrowed
from the FFA is established by law and varies among crops. The limits
on loans from the crop associations are taken from estimates of the
amount frequently borrowed by members. As this credit can be applied
only to NCI the quantity required does have this approximate limit.
The Demand Functions
Demand functions were derived for total capital used in the pro
duction process, and for the non-traditional cash inputs. The first
function is by crop and is based upon data taken from the linear pro
gramming solutions. The second function is also by crop, but only for
cotton and rice, and is derived from the regression analysis. In both
cases demand is considered to be a function of the MVP of the respective
input. In order to scale the MVP to the equivalent of the interest
rate, the quantity MVP-1 is used to derive the demand function. The
total cost of capital is equal to 1+i; however, the net cost of capital
is equal to the interest rate (i). The equilibrium point between
supply and demand for capital is where MVP=l+i, or, in terms of interest
rate alone, where MVP-1=i.
Demand Derived from the Programming Solutions
The MVP of an input can be approximated by using the shadow prices
in the programming solution. The shadow prices given represent the
addition to profit that would be gained by using an additional unit
of capital, that is, one peso. The shadow prices were calculated using
capital input coefficients and a profit function which includes interest