Joint demand

Joint demand
See also

According to Dictionary of International Economics Terms joint demand is "a demand for two or more goods or services that are used together (such as cars and tyres). As a result, a change in the demand for one causes a change in the demand for the other" (J.O.E. Clark 2006, s. 158).

Demand for some products (especially raw materials and components) is subject to a phenomenon known as joint demand. The phenomenon of common demand occurs when at least two items are used jointly (in combination) to produce a product. A good example of this is the company that produces the axes. The company will need an equal number of ax holders and ax blades; these two components are therefore required together. In the absence of ax holders, the manufacturer buys less ax blades. Understanding the effects of common demand is very important for a marketer who sells many commonly required items. Such a marketer is aware that when a customer begins to buy one of the commonly required items, there is a good opportunity to sell related products (W.M. Pride, O.C. Ferrell 2014, s. 257).

Other, most common examples of joint demand may be for example:

  • cars and fuel;
  • glasses and frames;
  • doors and door handles;
  • lamps and bulbs;
  • mobile phone and telephone subscription.

Joint demand and joint supply

The concept of joint demand has already been explained and it is closely related to the joint supply. The joint supply is "a situation in which two or more goods are produced together using the same supply. A change in the production of one good results in a change in the production of another (but only if their proportions can be varied)" (J.O.E. Clark 2006, s. 159).

Neumann used the following example to explain the relationship between joint demand and joint supply. If, before the spread of lifts, city apartments had a lower price, the higher they were, then, according to Neumann, this would be an exception to the rule that prices must correspond to production costs. He believed that the production costs were higher for the upper floors, because during their construction the material must be moved to a greater height, and the weight of these floors means that the load-bearing walls must be thicker than otherwise. But it is also obvious that in addition to floors, walls and ceiling, the house must have a land on which it will stand, and a roof to cover it - of which the first is usually very expensive to buy. These costs or interest on them should be spread over the rent for all apartments, and it is not possible to determine in advance which rule should be used. As has already been shown in the above case, the rental of various apartments is simply regulated by demand, that is, mainly by the appropriate comfort required by buyers, and suitability for various purposes; or as a last resort according to their extreme utility (B. Sandelin 1998, s. 84).

References

Author: Patrycja Czerwiec