Joint Supply Definition Example Vs Competitive Supply

Joint Supply Definition

The producers increase the supply of a product due to its demand. However, the other products derived during the production or supply of the main product may not have the same level of demand compared with the demand for main products. Hence depending on the economic conditions and other factors, the producers can sell the joint products efficiently.

Key Takeaways

Joint supply occurs when the supply of a product increases or decreases with the supply of another product.For example, when the supply of sheep increases to meet the demand for leather, the supply of milk and meat also increases.The phenomenon is common in the agricultural and oil industry.It is different from the competitive supply and joint demand. Competitive supply usually occurs when a factor of production is used for multiple purposes. Joint demand occurs when demand for a product increases the demand for another product.

Joint Supply Explained

Joint supply is associated with products capable of providing more than one output. The processing of such products results in the delivery of joint products. This phenomenon can happen in diverse industries like oil and agriculture. Furthermore, investing in products or sources capable of producing multiple commercial products is always profitable.

The different products obtained from the single source can have similar or different values and demands, and they can be unrelated or related products. Sometimes producers can sell all joint products from a source at a premium, sometimes at a discount or one product at a premium, and others at a discount or competitive price. However, if the input product is scarce, the supply of all joint products or products derived from it is affected. Furthermore, the process of deriving multiple products from one single product or process can be lengthy, expensive, and may require a good amount of setup.

It is different from the concept of joint demand. The concept of join demand points to the relationship between the demand of two or more products. For example, in the case of two complementary goodsComplementary GoodsA complementary good is one whose usage is directly related to the usage of another linked or associated good or a paired good i.e. we can say two goods are complementary to each other. read more, if the demand for one good increases, the demand for the other goods also increases proportionally. It often requires independent production of both goods. Whereas interpreting joint supply meaning, t indicates the supply of two or more goods shows positive correlationPositive CorrelationPositive Correlation occurs when two variables display mirror movements, fluctuating in the same direction, and are positively related. In layman’s terms, if one variable increases by 10%, the other variable grows by 10% as well, and vice versa.read more due to their common source of origin.

Example

The most common example of joint supply is associated with livestock products. Imagine a farmer with many livestock animals such as cows, goats, hens, and sheep. The farmer pets them all and uses milk and wool to sell. Here, a domesticated animal sources multiple products like milk, eggs, wool, milk, and meat. Likewise, if the farmer can further process the milk obtained from cows and goats, other dairy products can be derived like butter, cream, and cheese. Suppose the farmer decides to buy more cows for purposes like plowing in the traditional method and livestock grazing to reduce carbon footprint. In that case, the supply of milk also increases with the increase in the supply of cows.

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Let’s interpret this scenario using the joint supply curveSupply CurveSupply curve represents the relationship between quantity and price of a product which the supplier is willing to supply at a given point of time. It is an upward sloping curve where the price of the product is represented along the y-axis and quantity on the x-axis.read more of cow and milk. In the above demand and supply curve for cows, it is visible that as demand for cows increases (D1 to D2), the price of cows increases (P1 to P2), and supply also increases (Q1 to Q2). At the same time, there was no noticeable increase in the demand for milk, but its supply increased (Q1 to Q2) (graph of milk) in the market following the rise in the supply of cows. Since there was no corresponding increase in demand, milk prices decreased (P1 to P2) (graph of milk).

Joint Supply Definition Example Vs Competitive Supply