The Interrelationship Between Markets

Question 1

What is a competitive market?

Answer 1

A market that operates through the interaction of demand and supply

Question 2

What are complements?

Answer 2

Products that are bought alongside another product e.g. tennis balls and tennis rackets

Question 3

Do complements have an negative or positive cross elasticity of demand?

Answer 3

Negative

Question 4

Give an example of a substitute good

Answer 4

If the PRICE of beef increases, the DEMAND for lamb will increase

Question 5

Do substitutes have a positive cross elasticity of demand?

Answer 5

Yes, as the price of Y increases, the demand for X will increase

Question 6

What is composite demand?

Answer 6

An increase in demand for one good will restrict its availability for another use

Question 7

Give an example for composite demand

Answer 7

Land can be used for wheat or barley. If the demand for wheat increases, more land will be taken up for wheat. Therefore, less barley will be grown

Question 8

What is derived demand?

Answer 8

Where the demand for one product creates demand for another e.g The demand for tinned tomatoes creates demand for the metal used to make a tin

Question 9

What is joint supply?

Answer 9

When the production of one product creates a by-product that can also be supplied

Question 10

Give an example of joint supply

Answer 10

Increased demand for lamb will automatically increase the supply of wool