Demand And Supply Interrelated Market Flashcards
What effects does compliments have on the D&S graph ?
Both demand and supply curve will increase and increase together.
Example : washing machine and washing powder
When the unit cost of production for washing machine decrease due to the advancement of technology, the higher potential profit per unit.
Hence, supply for washing machine increases.
When the supply of washing machine increases, the demand of washing powder will increase. As both goods are complements that are used together when washing clothes.
What effects does substitutes have on the D&S graph ?
The demand of a product varies directly with the price of its substitutes.
Example : chicken and pork
When the price of chicken increases, the quantity demanded for chicken decreases. Supply for chicken decreases, leftward shift of the supply curve.
This will cause an increase in the demand for pork. This will be shown as a rightward shift in porks demand curve. The price of pork and quantity of pork purchase will increase.
What effects does joint supply have on the D&S graph ?
When the products are in joint supply, an increase in the demand for one of them will cause an increase in the supply of the other.
Example : cow meat and leather
Increase in demand in beef lead to increase in price and quantity. More beef production leads to greater supply of leather.
This is because they are jointly produced.
Supply for leather rises, price for leather decreases, quantity in grasses.
For joint supply what affects the extent of impacts on market price and quantity ?
The extend of increase in supply of leather depends on the extend of the increase in the quantity supplied for beef
What effects does competitive supply have on the D&S graph ?
They are goods that are produced using the same resources such that the resources used in one good cannot be used to produce the other.
An increase in demand for one of them will cause a decrease in the supply of the other
Based on competitive supply how will it affect the graph ?
Example : palm oil and rubber
When the price for rubber increases due to the rise in demand , farmers will find it more profitable to produce rubber. Hence diverting resources away from palm oil.
Supply of palm oil will decrease. Causing and increase in price of palm oil and a fall in quantity of palm oil.
What is derived demand ?
A good that is demand for the production of another good.
For example : a DD is steel for the production of cars
A DD is sugar for the production of cakes and sweets
What effects does derived demand have on the D&S graph ?
When the demand for cars increases, the quantity of cars sold in the market increases. Hence the producers will increase their derived demand of steel in order to produce more cars.
The demand of steel will increase.
The price of steel and quantity will increase.
