(a) Explain how a change in demand for a good in one market can have an effect on the supply of a different good in another market. 1. If the demand for a certain good goes up then it’s supply will go up as well, this leads to more of the raw material needed to produce this good being used thus decreasing availability (in the case that the amount of the raw material is limited) to other goods that may be using this raw material as well. This is called composite demand. A good example for a scenario like this would be for example if a company’s factories use up a lot of electricity and scales up its production or opens new factories (in a massive scale) then electricity cost and availability for domestic use will change accordingly.
-demand goes up, raw material required increased, less raw material left for other industry. Electricity, milk, land. Composite demand. 2. Another way that demand for a good in one market can affect supply of another in a different market is if they were indirect substitutes for example the price of airplane tickets on the sales of cars, if plane tickets get very expensive then many people will prefer to own a car and travel by highways to their destination.
-demand for good decreases due to price, supply of substitute goes up in anticipation to seize position. Example plane tickets and cars

(b) Explain how a change in supply of a good in one market can have an effect on the demand for a different good in another market 1. If the supply for a good falls heavily but the good is necessary and it’s demand is highly inelastic then the non-necessary good’s demand will fall by as much as is necessary to compensate for people to buy it. A good example would be a steep rise in price of water (assuming no other liquids exist on the market) and the drastic decrease in the amount of iphones purchased.

-supply for good falls, demand inelastic, demand for other unnecessary (luxury) good falls. Water and iphones.

2.