TYPES OF SUPPLY
The following are the major types of supply.
1) Joint supply – Goods produced together: It is a supply of goods that are produced together. It occurs when two goods are produced together and at the same time. An attempt to produce certain items like beef (meat) instantly leads to the production of another items – hide and skin. Efforts made to increase production of palm oil might cause more palm kernel to be produced at the same time.
Therefore, an increase in price of palm oil, leading to its increased production, causes a fall in the price of palm kernel if it is not in high demand as more of it will be jointly produced with palm oil. That is, an increase in price of one commodity, palm oil or commodity A, causes a fall in the price of another commodity – palm kernel or commodity B. In other words, an increase in supply of one causes a rise in the supply of another, and a fall in its price.
2) Competitive supply – Supply of a commodity with several uses: It is a supply of a commodity or a factor of production that has various uses or serves different purposes. It can be used for one thing or the other. Thus the desire to have it becomes very competitive.
A parcel of land used for the rearing of animal may reduce the portion of land devoted to farming. Other good examples of competitive supply are :beef and milk, fowl and egg” etc. An increase in supply of cow (beef) and fowl reduce quantity of milk and egg as there will be less cow to produce milk and a fewer fowl to lay eggs. Thus an increase in price of cow or fowl leading to their increased supply will cause a rise in price of milk or eggs since there will be a few milk, or eggs in the market. That is, an increase in Supply of one (fowl) cause a fall in supply of another (egg) and its price rises.
3) Composite supply – supply of all goods with similar use: It is aggregate (total) supply of all similar goods that serve almost the same purpose. The total or composite supply of vehicles consists of supply of motor cars, lorries, buses, trailers, tippers, etc. That is, it is the total supply of similar items that satisfy particular or specific needs, e.g. vehicles for the movement of goods and people from one place to another. Composite supply of furniture comprises tables, chairs, desks, benches, etc.
Interpretation of types of supply
1) A fall (or a rise) in supply of one commodity (X) causes a fall (or a rise) in the supply of another commodity (Y), commodity X and Y are JOINT supply.
2) An increase in price of commodity (A) (leading to a rise in its supply) causes a decrease in supply of commodity (B). A and B are in COMPETITIVE supply.
3) An increase in supply of one commodity (A) causes a decrease in the supply of another commodity (B), the two commodities (A & B) are in COMPETITIVE supply.
4) An increased demand for commodity (A) (causing a rise in its supply) leads to a fall in price of commodity (B), the two commodities (A & B) are in JOINT supply.
5) A fall in price of one item leads to an increase in supply of another or a fall in price of one commodity causes a fall in price of another. The two commodities are in COMPETITIVE supply.