This research investigates the factors affecting production structure and water demand of irrigated wheat in Iran. The concept of the long - run nonnalized profit function provides an alternative approach to analysis of the fann production structure and derived system of share demand equations for variable inputs are fonnulated within the translog profit nonnalized frame work. In addition, the variable inputs of labour, fertilizer, water rate, pesticide and machinery costs were included in the model. The factor demand functions are estimated jointly, using pool time series and cross sectional data (1363-77) from Iran irrigated wheat land fanning. Variable input demands and wheat supply elasticities for inputs with respect to variable input price as well as wheat price are estimated. A variety of policy analyses are possible by using the estimates presented in this research. A policy - maker can construct information to evaluate the impact of other combinations of policy changes and develop them in this respect. The results indicate that producers tend to maximize their profits, wheat price being a more powerful policy instrument than Input Price to influence water use as well as output supply.
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