What
you know about
In full competition, we assume that
the price of one thing is totally different from the other one. But this view
is totally a predication or assumption which is totally false. There are two
types of things – alternative and complementary things. In both the category,
things have many alternative things and some-one have complementary things.
In
alternative things if price increase of one thing then people start to buy
other one. In complementary things - two things are associated with each other.
If there is an increase or decrease in the price of one thing, it also affects
the demand & supply of other things or related things.
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| Interdependent Price |
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| Interdependent Price |
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Joint demand or complementary – when we demand two or more thing
jointly, we call it a joint demand or complementary demand – like car or petrol
and pen or ink and woolen or meat etc. when we increase the price of one thing
automatically it decrease the demand of other one. For example if car price
increase then less person able to buy it and demand of petrol decrease. But we
assume that there is no change in the petrol supply. If car price increase from
P – P1 then its demand decrease from Q – Q1. The petrol demand also decrease
and price also come down.
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Derived demand – there are lot of production
factors and their demand also associated with the final product demand like we
require labor, raw material and other thing to make a building so demand of
labor, raw material & other thing is a derived demand.
