Joint and competitive supply

Most goods and services are related in some way. This means that changes in market conditions for one product, or decisions taken by producers, can have significant effects on the supply of other products. For example, changes in the price of electric cars can encourage a car manufacturer to produce more of these, and possibly less of petrol or diesel cars.

The supply of goods can be connected in the following ways:

Joint supply

Joint supply refers to a situation where the production and supply of one good leads to the production and supply of another good. There are many instances where goods are by-products of other goods. In producing milk, whey protein is also produced as a by-product which may be then added to protein drinks.

Competitive supply

Competitive supply refers to a common situation facing a producer - how best to use the scarce resources at its disposal.

Resources an often be used in many different ways, and produce a variety of products. Farmers could use their land to produce and supply several different crops. Car manufacturers could use their current plant and machinery to produce electric or petrol driven cars.

An increase in the supply of electric cars leads to a fall in the supply of petrol driven cars.