3.1.2.6 THE ITERRELATIONSHIP BETWEEN MARKETS

Define joint demand

Joint demand refers t a situation where two or more goods are demanded together because they are complementary (toothpaste and toothbrush)

Define composite demand

Composite demand refers to a situation where a single god is dreaded for triple different purposes (milk)

Define derived demand

Derived demand refers to the demand for a good or service that arises from the demand for another good or service

How does labor link to derived demand?

Labor is derived demand - as businesses only demand workers if there is more demand for the product (businesses demand labor, workers provide labor)

If there was an increase in demand for beef, how will this impact the supply of leather?

Beef and leather are joint products - they come from the same source (cattle)

Joint supply as producing one good (beef automatically produces another (leather)

How are composite demand and competing supply related?

They both involve allocation of resources and resource trade offs

• in composite demand, the focus is on how demand from different uses affects toroidal demand for a different good

• in competing supply, the focus is on how supply of one goof affects the supply of another good

So an increase in one use or production can reduce availability for other uses

Explain how diverting crop production to meet the demand for biofuel is affecting world poverty?

Many countries produce biofuels from food crops, producing biofuels is a new demand for crops- example of derived demand

-reduced supply of crops for food, global supply decreases, higher demand for biofuel, raises crop prices, higher food prices

Poor households spend a large share of income on food - higher food prices, food becomes less affordable, more poverty

Explain 2 causes other than increased biofuel production, of recent changes in food prices?

1 - droughts, floods, hurricanes , heatwaves - destroy crops and reduce yields reduces supply, prices increase

2 - higher costs for fertilizers, fuel,labour or machinery - increased production costs, increased prices

What factor of production links to derived demand?

Labour - businesses demand labour and workers provide labour

Businesses only demand workers if there is more demand for the product

Are crops fixed in the short term or long term?

Short

What did the Russia/Ukraine war cause an increase in price in?

Wheat/grain - this increases the price of bread

Was COVID a supply side or demand side shock?

Both