3.6

• What is meant by the ‘interrelationship between markets’?

  Refers how a change in one market (e.g price or demand) can affect other related markets, due to links like substitutes, complements, or shared resources
• what are substitute goods?

  goods that satisfy similar wants - if price of one rises, demand for the other increases
• what are complementary goods?

  goods used together - if demand for one increases, demand for the other usually rises too
• what is derived demand?

  demand for a good that is dependent on the demand for something else
• what is joint supply?

  when one good is produced, another good is also produced from the same raw materials, perhaps as a by-product
• what is composite demand?

  demand for a good which has multiple different uses, increases in demand for one use of the good reduces the supply of the good for an alternative use
• what is competitive demand?

  When a good is viewed by consumers as an alternative for another good i.e. the two goods are substitutes
• how does a change in one market’s supply affect others in joint supply?

  an increase in one goods production leads to more supply of the linked product, possibly lowering its price
• what is competitive supply?

  when one resource can be used to produce either of two goods - producing more of one means less of the other
• How can interrelated markets cause inflation?

  A price rise in one market (like oil) increases costs across many industries (transport, heating, production) - cost-push inflation
• how do interrelated markets affect policymaking?

  governments must consider indirect effects - e.g taxing sugary drinks may affect the packaging industry and small cafes
• why is understanding interrelationships useful for firms?

  firms can predict how competitors’ pricing or complementary products might affect their own demand, allowing better pricing and production planning
• how do labour markets interrelate with product markets?

  • higher demand for goods - firms hire more workers - labour demand rises
  • low product demand - job cuts
• what happens when supply in one market collapses?

  it can cause shortages and prices rise in dependent markets
• can interrelated markets buffer economic shocks?

  yes - if one market falls, substitutes may benefit. for instance, if avocado supply fails, demand for hummus or other spreads may rise
• whats the difference between joint supply and joint demand?

  Joint supply: When the production of one good results in the production of another good Joint demand: When the consumption of one good leads to the consumption of another good