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The Interrelationship
Between Markets
- Competitive Markets
- ~bringing buyers (demanders) and sellers (suppliers) together
creates what economists refer to as a market
- ~we can split markets up into factor markets and goods markets
- goods (and services) markets are where
consumer or capital goods are traded
- factor markets are where the factors of production are bought
and sold (e.g. raw materials such as iron ore, commodities)
- goods (and services) markets are where
consumer or capital goods are traded
- ~we can split markets up into factor markets and goods markets
- ~bringing buyers (demanders) and sellers (suppliers) together
creates what economists refer to as a market
- The impacts of changes in demand and supply on associated markets
- Joint Demand
- Characteristics of complementary products (goods that are consumed together, e.g.
bread and butter, DVD and DVD player) where a change in demand for one good
causes a similar change for the other good (high cross elasticity of demand)
- Characteristics of complementary products (goods that are consumed together, e.g.
bread and butter, DVD and DVD player) where a change in demand for one good
causes a similar change for the other good (high cross elasticity of demand)
- Demand for substitute goods (substitute markets)
- SUBSTITUES= goods that can be used as alternatives for
another good, for example bus and rail services or mars bars
and snickers. Close substitutes ar good alternatives, whereas
weak substitutes are no very good or likely alternatives, such
as gas-fired power in the UK and hyrdoelectric power.
- SUBSTITUES= goods that can be used as alternatives for
another good, for example bus and rail services or mars bars
and snickers. Close substitutes ar good alternatives, whereas
weak substitutes are no very good or likely alternatives, such
as gas-fired power in the UK and hyrdoelectric power.
- Composite Demand
- COMPOSITE DEMAND= a
good that is demanded for
more than one purpose so
that an increase in demand
for one purpose reduces the
available supply for the other
purpose, typically leading to
higher prices, e.g. milk used in
butter and cheese
- COMPOSITE DEMAND= a
good that is demanded for
more than one purpose so
that an increase in demand
for one purpose reduces the
available supply for the other
purpose, typically leading to
higher prices, e.g. milk used in
butter and cheese
- Derived Demand
- DERIVED DEMAND= when the demand for one good or service comes from the demand for another good or
service. The demand for cars stimulates the demand for steel, therefore the demand for steel is derived demand
- DERIVED DEMAND= when the demand for one good or service comes from the demand for another good or
service. The demand for cars stimulates the demand for steel, therefore the demand for steel is derived demand
- Joint Supply
- JOINT SUPPLY= when the production of one good
also results in the production of another (made of the
same raw material). In the refining process of crude
oils, petroleum, paraffin and others are produced.
- JOINT SUPPLY= when the production of one good
also results in the production of another (made of the
same raw material). In the refining process of crude
oils, petroleum, paraffin and others are produced.
- Any change in the conditions or determinants of supply or demand will
interfere with the market equilibrium and create a temporary
disequilibrium situation that may also affect other interrelated markets.
- It is important to be able to consider effects of increases and decreases
in supply and demand for the goods and associated markets
- It is important to be able to consider effects of increases and decreases
in supply and demand for the goods and associated markets
- Joint Demand
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