Why do we need joint supplies?
In economics, a “joint supply” is a good or service that can produce more than one result. One typical example is the dairy business, where cows are used for milk, beef, and hide. You can get meat, milk, wool, and leather from sheep. The stock of dairy and beef products will increase if the quantity of cows increases.
How to Understand Joint Supply
When there is a shared supply, the supply and demand for each product from the same source are related. For instance, if the market for wool goes up and sheep farmers raise more animals for wool, sheep meat production will also go up. Because of this, more meat will be available, and costs might go down.
Sometimes, like with cotton and cottonseed, the amounts of the two goods are always the same. In this case, you can’t change the measurements. In some situations, the percentage may change. Cross-breeding lets you, for example, make sheep that are good for wool and meat. Increasing the amount of one can somewhat come at the cost of increasing the amount of the other. Analysts keep a close eye on products supplied by multiple companies. This is because what happens with one company can greatly affect investments in another.
The sharing of costs is another critical problem regarding joint supply items. Since both goods come from the same source, it can be tricky to figure out how to split costs.
When there are two goods, it’s not usually possible to just split the costs evenly because one product sells for more than the other. An equal split will make gains on one product look lower or higher than they are. In the same way, assigning costs at random will lead to false results. As a businessperson, you probably use price matrices that start with the finished goods and work backward to figure out how much something costs for reporting reasons.
Need and Supply Together
Joint supply and demand don’t always go together. On the other hand, joint demand is when the desire for two things is linked. For instance, printers need ink to work. In the same way, ink refills don’t do anything without a printer. For example, think about knives and their blades or car oil and gasoline.
For the most part, joint demand means that you need two things because they work well together to help you. There will be a high and low cross-elasticity of demand for two things that are in demand together. That is, if the price of ink goes down, more people may want to buy printers.
Conclusion
- In joint supply, a good or process can give rise to more than one result.
- Cattle are an example of a joint supply because cows give many things, like milk, beef, and hide.
- Joint demand and supply don’t always go together.
- To put it simply, joint demand is when you need two things because they work better together, like shears and razor blades.
