30 BULLETIN 1440, XL S. DEPARTMENT OF AGRICULTURE 
STATISTICAL BASIS FOR THE CONCLUSIONS \ri 
Certain assumptions upon which the following analysis is based 
should first be stated and discussed. These assumptions are 
briefly : 
(1) The demand and supply of hogs remaining unchanged, the 
price of hogs will vary with the general level of prices; that is, a 
given quantity of hogs will exchange for a fixed quantity of other 
commodities. (The accuracy of this assumption is tested in part of 
the analysis.) Except where explicitly stated otherwise, the term 
" price" will be used to mean price in terms of units of constant 
purchasing power; that is, current dollar prices divided by the price 
index used. 
(2) For the purpose of studying the demand schedule and the 
level of demand, supply may be stated as merely the volume of prod- 
uct reaching the market. This leaves the study of the causes 
affecting the quantity supplied — really, the study of the supply 
schedule — out of consideration to be handled as a separate problem. 
The supply which affects the price at a given time may be partly 
the immediate or short- time supply, and partly the general or long- 
time supply. How the market becomes cognizant of the trend of 
supply, how it reacts to estimates of the supply available on farms, 
and how it reacts to forecasts of supply, are all specific problems 
connected with this assumption. 
(3) At any given moment, the price that will be paid is a function 
of the supply. The statistical analysis should determine just what 
is the nature of this relation. 
(4) The price realized for a given supply reaching the market 
during a given period constitutes a single point on a curve expressing 
the relation between supply and demand at that time; hence over a 
succession of periods during which demand remains unchanged, the 
different prices realized for the different quantities supplied in each 
period indicate quantitatively the nature of the relation between 
supply and price. 
(5) A change in demand will be shown by (a) the movement of a 
larger supply at the same price, (b) the movement of the same supply 
at a higher price, or (c) by the movement of a different supply at a 
higher price than would have been obtained for the same supply 
at the previous level of demand. (This depends upon having a 
demand schedule generalized for the previous condition under 
assumption 4.) 
Among the factors which may be responsible for changes in market 
demand, the following may be mentioned: (1) Growth of population, 
(2) changing dietary habits, (3) periodic changes in the buying power 
of consumers, with changing business conditions, (4) changing prices 
of substitute products, (5) changing foreign demand, and (6) the 
quantity of hog products in storage. 
If the assumptions stated are true, it follows that the price at any 
time can be expressed as a function of variables representing the 
different factors mentioned. As will be shown in the following 
discussion, functions determined mathematically for the actual 
observations do account for as much as 93.6 per cent of the observed 
(root-mean-square) variation in actual (not " deflated") prices, or, 
in terms of " determination," the factors included represent 87.6 
