TYPES OF DEMAND AND SUPPLY
demand is the type of demand which occurs as a result of demand for other commodities. The demand for one commodity will necessitate the demand for another commodity. For example, flour and sugar are demanded because there is demand for bread. Labour is demanded to construct the highway because there is a demand for good roads.
Types of Demand
Derived demand: Derived demand is the type of demand which occurs as a result of demand for other commodities. The demand for one commodity will necessitate the demand for another commodity. For example, flour and sugar are demanded because there is demand for bread. Labour is demanded to construct the highway because there is a demand for good roads. So, labour, flour and sugar are “derived” demand commodities.
Joint or complementary demand: Joint demand is a demand which occurs when two commodities that are related to each other are demanded at the same time.
These two commodities are said to be complementary to each other as a change in the demand for one commodity will bring about a similar change in the demand for the other.
Examples of joint demand are bread and butter, tea and milk, car and petrol. Sometimes they are described as “joint demand goods”.
Competitive demand: When two commodities are fairly close substititutes to each other, they are in competitive demand. In other words, they serve the same purpose or perform a similar function such that an increase in the demand for one will result in a fall in the demand for the other.
Examples of commodities that are close substitutes are Boumvita and Ovaltine, Malta Guinness and Maltina, Omo and Elephant detergents, butter and margarine.
If the price of any of these pairs of commodities is high, the consumers may switch over to the other close substitute which has a lower price.
- Composite demand: Demand is said to be composite when a commodity is required to serve two or more purposes. For example, sugar is widely used in the home for beverages as well as in industries for making pastries and confectionery.
- If the industrial demand for sugar suddenly increases, it will affect the quantity of sugar demanded in the home.
Types of Supply
- Composite supply: Composite supply occurs when a certain commodity can serve two or more purposes. In other words, the supply of the commodity for one purpose will greatly affect
- the supply of the same commodity for another purpose.
For instance, crude oil. The supply of crude oil (petroleum for the production of petrol will greatly affect the production of kerosine and .ether uses of petroleum.
If more petroleum is needed for petrol production, the price of petroleum will rise. People who require petroleum for other purpose? will be faced with the high price.
Joint or complementary supply; Joint or complementary supply occurs when two or more commodities are produced and supplied from one source.
An increase in the production and supply of one will automatically bring about increase in the production and supply of the other commodities that are produced from the same source.
For example, an increase in production and supply of petrol from petroleum can also lead to an increase r. and supply of kerosine. Petrol and kerosine are obtained from the same source which is petroleum.
Competitive supply: Competitive supply occurs when many commodities are supplied for the satisfaction of a particular want. In other words,
it is the supply of two or more commodities that serve as substitutes or alternatives to one another, e.g. meat and fish, Omo and Elephant blue detergents, butter and margarine, Close-Up and Maclean toothpastes.
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