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Definition of Composite or Rival Demand:

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

Example:

Steel, for example, can be used in making guns, bridges, cycles, cars, and several other machinery. 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.

Definition of Composite Supply:

A good is said to be in composite supply if its demand can be obtained from various sources.

Example:

For example, 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.