Interrelationships between markets Flashcards
What is a substitute good including 2 examples
A substitute good is one which can be used as an alternative to another good
e.g. tea and coffee or coke and pepsi
Describe competitive demand including what happens on a diagram
- It describes the demand between 2 substitute goods
- If the price of one goes down, the demand for the other goes down
- Supply out for one, demand shifts in for the other
What are complement goods including 2 examples
Goods that a consumer uses together
e.g. petrol cars and petrol or DVDs and DVD players
Explain joint demand, including the effect on a diagram
-Describes the demand between complements
- If the price of one goes down, the demand for the other will go up
- ie a shift out of supply for one causes a shift out in demand for the other
What are the 2 types of links between the factor market and product market
1) Derived demand
2) Costs of production links
What is derived demand including 2 examples and explain effect on diagram
- Increase in demand in the product market causes an increase in demand for the factor market
- e.g. goods and labour or coke and sugar
- Shift out in demand of product causes shift out in demand of factor
Explain the costs of production links between factor and product markets including an example and effect on diagram
- Change in price of factor causes change in cost of product
- e.g. oil and heating
- Shift out in demand for factor causes shift in for supply for product
Explain joint supply including example and diagram effect
- 2 goods that are supplied together (produced in the same way)
- e.g. beef and leather (kill cows)
- Shift out in demand for beef causes shift out in supply of leather
Explain composite demand including example and diagram effect
- When a factor has more than 1 purpose
- e.g. Milk for cheese, yoghurt and butter
- Increase in demand for cheese causes less supply of milk for butter
