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Home Price and Output Determination Under Perfect Competition Composite or Rival Demand

 

Composite or Rival Demand:

 

Definition and Explanation:

 

"If a commodity can be put to several uses, it is said to have composite or rival demand".

 

Example:

 

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.

 

The aggregate 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.

 

Composite Supply:

 

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.  

 

If the 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.

Relevant Articles:

Market Structure
Perfect Competition
Equilibrium of the Firm
Short Run Equilibrium of the Price Taker Firm
Short Run Supply Curve of a Price Taker Firm
Short Run Supply Curve of the Industry
Long Run Equilibrium of the Price Taker Firm
Long Run Supply Curve For the Industry
Price Determination Under Perfect Competition
Market Price
Determination of Short Run Normal Price
Long Run Normal Price and the Adjustment of Market Price to the Long Run Normal Price
Distinction/Difference Between Market Price and Normal Price
Interdependent Prices
Joint Supply
Fixation of Railway Rates

Composite or Rival Demand

 

Principles and Theories of Micro Economics
Definition and Explanation of Economics
Theory of Consumer Behavior
Indifference Curve Analysis of Consumer's Equilibrium
Theory of Demand
Theory of Supply
Elasticity of Demand
Elasticity of Supply
Equilibrium of Demand and Supply
Economic Resources
Scale of Production
Laws of Returns
Production Function
Cost Analysis
Various Revenue Concepts
Price and output Determination Under Perfect Competition
Price and Output Determination Under Monopoly
Price and Output Determination Under Monopolistic/Imperfect Competition
Theory of Factor Pricing OR Theory of Distribution
Rent
Wages
Interest
Profits
Principles and Theories of Macro Economics
National Income and Its Measurement
Principles of Public Finance
Public Revenue and Taxation
National Debt and Income Determination
Fiscal Policy
Determinants of the Level of National Income and Employment
Determination of National Income
Theories of Employment
Theory of International Trade
Balance of Payments
Commercial Policy
Development and Planning Economics
Introduction to Development Economics
Features of Developing Countries
Economic Development and Economic Growth
Theories of Under Development
Theories of Economic Growth
Agriculture and Economic Development
Monetary Economics and Public Finance

History of Money
 

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