APPENDIX 1


 The Relationship of the Demand for Transportation and the
 Elasticity of Supply and Demand for the Commodity



Begin by assuming linear demand and supply functions:


 (1) QD = a b PQ

 (2) QS = c + d PFOB

 (3) QS QD Q

where: QD' QS = quantities demanded and supplies,
 respectively

 PQ PFOB = demand and supply prices (net of transpor-
 tation costs, PT)

 a,b,c,d = positive parameters


Taking the inverse of (1) and (2) and using (3):

 1
 (4) P = (a-Q), and


 (5) PFO 1 (-c+Q)
 (5) FOB d

Define PT, the transportation prices as:


 (6) PT =Q FOB


 (6a) PT = (a-Q) Z (-c+Q)


 (6b) PT ( Q( ).