interrelated markets

• Complements


  Goods that are in joint demand, usually bought together
• Impact of price change of complementary goods

  1. If price of printers increases, demand for printer ink decreases

  2. If price of razors decreases, demand for razor blades increases
• Substitutes


  Goods that are in competitive demand, rival goods that are similar to each other
• Substitutes


  • Coke and Pepsi
  • Big Mac and Whopper
  • Apple iPhone and Samsung Galaxy
• Impact of price change of substitute goods

  1. If price of Coke increases, demand for Pepsi increases

  2. If price of Coke decreases, demand for Pepsi decreases
• Derived demand


  Demand for a good or service that comes from the demand for something else
• Derived demand


  • Aluminium (from demand for cars)
  • Labour (from demand for goods and services)
  • Airline travel (from demand for holidays or business)
• Impact of increase in demand for a good with derived demand


  Demand for the input (e.g. aluminium, labour, airline travel) increases
• Composite demand


  Two goods require the same input, so increase in production of one good reduces supply of the other
• Composite demand


  • Bread and livestock (both require wheat)
  • Cheese and butter (both require milk)
• Impact of increase in demand for one good with composite demand


  Reduces supply of the other good that shares the same input
• Joint supply


  Increase in production of one good increases supply of another good, as it is a byproduct or requires the first good
• Joint supply


  • Honey and beeswax
  • Crude oil, petroleum and paraffin
• Impact of increase in production of one good with joint supply

  Supply of the other good increases