3.6 The Interrelationship Between Markets

Question 1

Changes in markets

Answer 1

• Changes in one market are likely to affect other markets.
• This relates to the types of demand and supply, and how they link different markets.

Question 2

What are the types of demand

Answer 2

• derived demand
• composite demand
• joint demand

Question 3

What is derived demand?

Answer 3

• This is when the demand for one good is linked to the demand for a related good
• For example, the demand for labour is derived from the goods the labour produces.
• For example, if the demand for cars increases, the demand for the labour to produce those cars will increase.

Question 4

What is composite demand?

Answer 4

• This is when the good demanded has more than one use.
• An example could be milk.
• Assuming there is a fixed supply of milk, an increase in the demand for cheese will mean that more cheese is supplied, and therefore less butter can be supplied.

Question 5

What is joint demand?

Answer 5

• This is when goods are bought together, such as a digital camera and a memory card.
• An increase in demand for digital cameras is likely to lead to an increase in demand for memory cards.
• Demanding substitute goods, such as Samsung TVs over Panasonic TVs, would
  reduce the quantity supplied of Panasonic TVs and also reduce their price.

Question 6

What types of supply are there?

Answer 6

• Joint supply: This is when increasing the supply of one good causes an increase or decrease in the supply of another good.
• For example, producing more lamb will increase the supply of wool.