Joint Supply

Publication Date :

18 Feb, 2022

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Table Of Contents

Joint Supply Definition

Joint supply occurs when the supply of a product contributes to the supply of two or more other products in the economy. This phenomenon is common if the input material, source item, or its method of processing results in more than one item or by-products.

The producers increase the supply of a product due to its demand. However, the other products derived during the production or supply of the main product may not have the same level of demand compared with the demand for main products. Hence depending on the economic conditions and other factors, the producers can sell the joint products efficiently.

Joint Supply Definition

Joint supply occurs when the supply of a product increases or decreases with the supply of another product.
For example, when the supply of sheep increases to meet the demand for leather, the supply of milk and meat also increases.
The phenomenon is common in the agricultural and oil industry.
It is different from the competitive supply and joint demand. Competitive supply usually occurs when a factor of production is used for multiple purposes. Joint demand occurs when demand for a product increases the demand for another product.

Joint Supply Explained

Joint supply is associated with products capable of providing more than one output. The processing of such products results in the delivery of joint products. This phenomenon can happen in diverse industries like oil and agriculture. Furthermore, investing in products or sources capable of producing multiple commercial products is always profitable.

The different products obtained from the single source can have similar or different values and demands, and they can be unrelated or related products. Sometimes producers can sell all joint products from a source at a premium, sometimes at a discount or one product at a premium, and others at a discount or competitive price. However, if the input product is scarce, the supply of all joint products or products derived from it is affected. Furthermore, the process of deriving multiple products from one single product or process can be lengthy, expensive, and may require a good amount of setup.

It is different from the concept of joint demand. The concept of join demand points to the relationship between the demand of two or more products. For example, in the case of two complementary goods, if the demand for one good increases, the demand for the other goods also increases proportionally. It often requires independent production of both goods. Whereas interpreting joint supply meaning, t indicates the supply of two or more goods shows positive correlation due to their common source of origin.

Example

The most common example of joint supply is associated with livestock products. Imagine a farmer with many livestock animals such as cows, goats, hens, and sheep. The farmer pets them all and uses milk and wool to sell. Here, a domesticated animal sources multiple products like milk, eggs, wool, milk, and meat. Likewise, if the farmer can further process the milk obtained from cows and goats, other dairy products can be derived like butter, cream, and cheese. Suppose the farmer decides to buy more cows for purposes like plowing in the traditional method and livestock grazing to reduce carbon footprint. In that case, the supply of milk also increases with the increase in the supply of cows.

Let’s interpret this scenario using the joint supply curve of cow and milk. In the above demand and supply curve for cows, it is visible that as demand for cows increases (D₁ to D₂), the price of cows increases (P₁ to P₂), and supply also increases (Q₁ to Q₂). At the same time, there was no noticeable increase in the demand for milk, but its supply increased (Q₁ to Q₂) (graph of milk) in the market following the rise in the supply of cows. Since there was no corresponding increase in demand, milk prices decreased (P₁ to P₂) (graph of milk).

Joint Supply vs Competitive Supply

Joint Supply	Competitive Supply
If the supply of a product increases, the supply of products derived from it also increases. For example, the increase in milk supply to produce butter also increases the buttermilk supply.	A product or resource can be utilized for more than one output or purpose. For example, growing two different crops in a land.
Any increase or decrease in the original product impacts the supply and demand of the products derived from it.	It is not necessary that the increase in raw materials or factor of production results in the increase in supply of all alternative products made using it.
The example can be easily discerned from the agricultural and oil industry.	Common in agriculture, real estate, and manufacturing sector.
For example, honey production increases the supply of beeswax, and entities can obtain numerous commercial products from petroleum waste.	A farmer can use his finite land for different purposes like raising livestock or different crops, and supply increases according to the farmer's decision.

Frequently Asked Questions (FAQs)

What is joint supply in economics?

It is a term used in economics to indicate the increase in the supply of a product due to the rise in the supply of other products since they originate from the same source. For example, increasing wheat farming to meet the demand for wheat increases the supply of wheat and straw.

What are joint demand and joint supply?

Joint supply occurs when the flow of a product capable of providing multiple output increases. In contrast, composite supply is when two or more products are sold in a bundle like mobile phones and accessories. Selling in a bundle is the organized and competent way of marketing and fulfilling the purpose. Every composite supply has one principal supply, the dominant or main product in the bundle.

What are joint supply and composite supply?

Joint demand occurs when the demand for a product shows a positive correlation with the demand for related goods. For example, the prolific working of one product depends on the other product; hence the demand for both products is connected. The most common examples are the demand for cars and petrol and printer and ink.