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We study each market independently, known as partial equilibrium, but obviously markets are actually linked. The demand for one good is affected by changes in the market for other related goods.
Note: The demand for all goods is effectively related because all goods compete for the scarce budget, the increase in the price of one good can affect all other purchases.
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Complementary Demand
The goods are used in conjunction with one another. Thus a shift in demand of one product will proportionately shift the demand curve of its complementary product as well.
Eg DVD players and DVDs.
Composite Demand
Demand arises from several sources, and an increase in demand for the particular good for use in a certain sector will decrease the availability of the good for use in another sector.
Eg Electricity for Domestic or Commercial Uses.
Competitive Demand
The goods are substitutes for each other. A rightward shift in the demand curve of one product will result in a leftward shift of the demand curve of the other product. This is most evident in cases where consumers switch to a cheaper commodity to maximise their satisfaction using their fixed disposable income. Eg Chicken or Duck.
Derived Demand
Demand for one good is derived from the demand for another good. This is akin to Complementary Demand, but different in that for Derived Demand, one good is involved in the production process of the other good. Eg Cars and the Steel used to make cars.
Joint Supply
Goods are produced jointly. The increase in the supply of one will lead to an increase in supply of the other. That is to say, it is impossible to produce one good without indirectly producing more of another good, as both of them are derived from the same sources. For example, Beef and Leather, which in this case, the common source is cow.
Competitive Supply
This is the case where producers can produce either of two or more products, so if they produce more of one, they will produce less of another. Hence, their demands are inversely proportional to each other. For example, Chicken and Eggs.
See also
