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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 production process, and for the non-traditional cash inputs. The first function is by crop and is based upon data taken from the linear programming 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-I is used to derive the demand function. The total cost of capital is equal to I+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=I+i, or, in terms of interest rate alone, where MVP-I=i.
Demand Derived from the Programming Solptions
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