Joint demand and competitive demand
Joint demand
🎮 Similarly, if you buy a new video game console, you will also need games to play on it to make the most of your purchase.
These are examples of complementary goods, which are products used together. Complementary goods automatically have joint demand. For instance:
- You use a smartphone and a phone case together.
- You use a video game console and video games together.
- You use milk and tea to make a great morning drink.
- You use lipliner with lipstick to create the perfect lip combo.
👉 This means that the demand for two or more goods is interdependent or complementary.
Let’s illustrate this example in a demand and supply diagram:
Competitive demand
Think about the name “competitive demand.” The word "competitive" suggests rivalry, tension, and competition.
What goods/services are normally in competition with each other? Can you think of any?
Here are some examples 😁
- Coca-Cola vs. Pepsi
- Coffee vs. Tea
- O2 vs. Vodafone
- Tesco vs. Asda
🔔 Hopefully this is ringing a bell - what do we call these kind of goods? Substitute goods!
👉 Remember substitute goods are products that can be used in place of each other.
- 🛍️ Tesco vs. Asda. Since these services are substitutes, a consumer in theory gets equal satisfaction whether they buy from Tesco or Asda. Therefore, competitive demand means that consumers can derive equal satisfaction from substitute products.
Let’s illustrate this in a demand and supply diagram:
Summary comparison of Joint demand and Competitive demand
Joint demand | Competitive demand |
Consumers require a combination of 2 or more products for maximum consumer satisfaction | Consumers can derive equal satisfaction from substitute products |
These are complementary goods | these are substitute goods |
for example, smartphones and smartphone cases | for example, 02 and Vodafone |