Interrelated Markets

Question 1

Define complements and give two examples

Answer 1

Complements are goods that are usually bought together and are in joint demand
E.g computers and keyboards, tables and chairs

Question 2

Define substitutes and give two examples

Answer 2

Substitutes are goods that are usually in competitive with each other and bought as an alternative. They are in competitive demand
E.g Pepsi and Coke, iPhone and Samsung

Question 3

Define derived demand and give two examples

Answer 3

Derives demand is when the demand for one good comes from the demand of a final good
E.g demand for aluminium is derived from the demand of cars
Demand for airline travel is derived from the demand of holiday

Question 4

Define composite demand and give two examples

Answer 4

Composite demand occurs when there are multiple uses for a single product.
If there is an increase in the production of good X there is a decrease in the production of good Y because there are less available resources to produce good Y.

E.g Wheat - bread and livestock
Milk- cheese and butter

Question 5

Define joint supply and give two examples

Answer 5

Joint supply is when two or more goods are produced together from the same common resource.
An increase in supply of good X (main product) leads to an increase of supply of good Y (the by- product)

E.g Trees and paper, Cattle and milk