Joint Demand and Joint Supply
Goods are said to be in joint demand1 when the use of one good requires the use of the other: cameras and films. These goods are also called complementary goods. When two goods are in joint demand, an increase in the price of one good will reduce the demand for the other good.
If goods are in joint supply2, the production of one of the goods automatically creates a supply of the other good. For example, it is not possible to produce mutton3 without producing sheepskins, and beef4 cannot be produced without creating a supply of hides5.
Problems arise when the demand for one of the goods in joint supply increases. For example, lead 6 and zinc7 are found in the same ore8. An increased demand for lead will cause more of it to be produced, and more zinc is also being produced, even though the demand for zinc has not changed. The increased supply of zinc will cause its price to fall.
Another interesting example of joint supply occurs in the transport industry. It means that on many return journeys9 vehicles are running empty. A petrol10 tanker will almost certainly return empty to the oil refinery11. ‘Empty running’12 raises the costs of transporting goods and people, because the transport charges13 must cover the costs of any return journey which does not have a paying load.
| 1joint demand – суміщений попит 2joint supply – суміщене пропонування 3mutton – баранина 4beef – яловичина 5hide – шкіра 6lead – свинець 7zinc – цинк | 8ore – руда 9return journey – зворотний рейс 10petrol – бензин 11oil refinery – нафтоочисний завод 12еmpty running – порожній пробіг 13charges – витрати |
Exercise 53 Skim the text above and:
a) explain what is …
joint demand, joint supply, return journey, oil refinery, empty running.
b) say whether these statements are true or false:
1. Goods are in joint demand when the use of one good does not require the use of the other. 2. Complementary goods are goods in joint demand. 3. If goods are in joint supply, the production of one of the goods automatically creates a supply of the other good. 4. Problems don’t usually arise when the demand for one of the goods in joint supply increases. 5. ‘Empty running’reduces the costs of transporting goods and people. 6. The transport charges must cover the costs of any return journey which does not have a paying load.
Exercise 54 Project.Make your own research of Ukrainian market for mobile phones of the latest models. Which are in the greatest demand? Does the supply meet the demand? What will the price of the good depend on?
Supplementary textB
Why are the Salaries of Professional Sport Stars So High?
Have you ever heard people complain about how many important, worthy professions, such as teaching and nursing, are underpaid, while professional baseball, football, and basketball players often make huge amount of money? If we compare the salaries of the 10 highest-paid NBA players with those of 10 common US professions we will see that the difference between what a top NBA player makes and what ‘ordinary Americans’ make is huge. Yet, some people would argue that nurses benefit society greatly by saving lives and teachers have a tremendous impact on the nation’s young people, while basketball players merely provide entertainment. So, from an economic standpoint, how can these salary differences be justified?
To a certain extent, all the salaries are determined by supply and demand. A high demand for a certain profession, combined with a low supply of people able to perform the job, will generally result in a high salary for the job, and vice versa. In the case of professional ball players, the law of supply and demand is especially important in setting salaries. The public likes to watch professional sports, and so there is a high demand for professional sports players. However the number of people who are able to meet the physical and mental challenges of playing professional sports – that is, the supply of players – is relatively small. In this case the demand exceeds the supply, which drives salaries up.
Also, professional basketball players are usually allowed ‘free agency’ – that is they are allowed to sell their services to any team willing and able to pay them what they want. When teams really want talented and popular players to pay for them, they will bid against each other, thus driving players’ potential salaries higher and higher.
Compare that situation with the case of high-school teachers. Although teaching is a very difficult and demanding profession, many more people are able to meet the requirements to become a teacher then are able to play basketball at a professional level. Therefore, even though the nation needs many more teachers than pro ball players, the supply of certified teachers often meets or even exceeds demand – keeping teachers’ salaries relatively low and stable.
Discussion:
How do you think players’ salaries would be affected if free agency was not allowed? Why? Do the high salaries of ball players affect the ticket prices you pay? What might happen in the market if players’ salaries continue to rise? What is to be done to raise the salaries of high-school teachers and nurses? Can you give some other examples of such ‘demanding’ and therefore highly paid professions?
Exercise 55 Read the text without using a dictionary and write its summary in two or three sentences. Discuss it with your classmates. What are the most notorious computer crimes you have heard of lately?