Interdependent Price

What you know about Interdependent Price

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.

Interdependent Price

 

Interdependent Price

ü  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.

ü  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. 

What you know about Joint Supply

What you know about Joint Supply

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.

There are lots of things which supply jointly because their production sources are same or they are produce jointly. In other words, one thing already associated with the other one production – like wheat and grass for animals or woolen and meat etc. we divide these thing into two parts – fix ratio or proportion and variables ratio or proportions.

ü  Production at fix ratio – this type of ratio is decided by our nature. For example if wheat demands increase – its price increase – grass production increase – grass price decrease.

 Joint Supply

 Joint Supply

ü  Production at variable ratio – in this part, we make a change in ratio and adjust it according to our need. For example if we require more meat then we use other types of bhade and if we require more woolen then we use different types of bhade.