Supply & its Types | Economics for JAMB PDF Download

Introduction

Supply refers to the quantity of goods and services that producers are willing and able to offer for sale in a given market at a particular price and time. It plays a crucial role in the functioning of markets and is influenced by various factors. In this set of notes, we will delve into the different types of supply and their interrelationships, as per the latest syllabus of JAMB Economics.

Joint/Complementary Supply

Joint supply, also known as complementary supply, occurs when two or more goods are produced together from a common input or resource. The production of one good automatically results in the production of another good. The interrelationship between joint supplies is such that an increase in the production of one good leads to an increase in the production of the other(s) and vice versa.
For example, in the case of beef and leather, an increase in beef production (e.g., due to higher demand) also leads to an increase in leather production because both products are derived from cattle. Similarly, a decrease in beef production would result in a decrease in leather production.

Competitive Supply

Competitive supply arises when producers have the flexibility to switch their resources and produce different goods or services. In this case, the goods or services being produced are substitutes for one another. An increase in the production of one good leads to a decrease in the production of another good, as producers allocate more resources to the more profitable option.
For instance, consider the production of corn and soybeans. If the price of corn increases significantly, farmers may decide to allocate more land and resources to corn production, resulting in a decrease in soybean production. This is because farmers are motivated by the potential profit from corn, leading to a competitive relationship between the two commodities.

Composite Supply

Composite supply refers to a situation where a single product can serve multiple purposes or satisfy different demands. In other words, a commodity has joint demand for different uses or functions. The production of such goods is influenced by the combined demand for all the purposes it serves.
A classic example of composite supply is milk. Milk can be used to produce various dairy products such as butter, cheese, and yogurt. The quantity of milk supplied is determined by the demand for all these different products. If the demand for butter and cheese increases, it leads to an increase in milk production to meet the composite demand.

Interrelationships between Supply Types

These different types of supply are not mutually exclusive and often overlap. In some cases, a single good can exhibit characteristics of both joint and competitive supply. For instance, in the petroleum industry, crude oil serves as a raw material for various products such as gasoline, diesel, and plastics. An increase in the production of gasoline may lead to a decrease in the production of other petroleum by-products, illustrating both joint and competitive supply characteristics.

Conclusion

Understanding the various types of supply and their interrelationships is essential for comprehending the dynamics of markets and how changes in one sector can affect others. Joint/complementary supply, competitive supply, and composite supply offer insights into how producers respond to price changes and shifts in demand for related goods. By recognizing these interdependencies, policymakers and businesses can make informed decisions to enhance market efficiency and ensure optimal allocation of resources.