Composite or Rival Demand:
Definition and Explanation:
commodity can be put to several uses, it is said to have composite or rival
Steel, for instance, can be used in making guns, bridges, cycles, cars,
and several other machineries. The demand for steel in all its separate uses
constitutes the composite demand. Take another case of land. It can be used for ploughing or for constructing houses or shops or factories on it.
demand for all these rises is called the composite demand. The price of a
commodity in composite demand is based on the principle of substitution. If the
demand of a commodity for a particular use increases, the supply of the
commodity in that particular direction will increase. It will result in the
decease of supply for other uses. As a result, price of the commodity for all
other uses will also rise. In the long run, the price of the commodity will tend
to be the same for all the uses and will be high enough to cover its marginal
cost of production.
A good is
said to be in composite supply if its demand can be obtained from various
sources. For instance, salt can be obtained from a salt mine or a sea. Take
another case of the composite supply of beverage. The demand for drink can be met
by coffee, tea, coca, oval tine, etc. The demand for meat can be satisfied by
beef, fish, mutton, etc.
commodities of composite supply are perfect substitutes of one another, then
there will be only one price for all of them in the market In case, the
different sources of supply compete for the satisfaction of a particular want
and are not goods substitutes, then their prices will be different. But, on the
whole, the prices of commodities will be directly related to the prices of other
commodities. If the price of one commodity rises, the price of the other
commodity which is in composite supply will also go up and vice versa.