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SAVINGS AND LOAN ASSOCIATION: A depository institution chartered by the Federal Home Loan Bank that was established to assist home owners with low-cost mortgage loans using savings deposits. However, S&Ls have expanded their activities and now provide most of the services of traditional banks, including checkable deposits.

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COMPLEMENT-IN-PRODUCTION:

One of two (or more) goods that are simultaneously produced using a given resource. A complement-in-production is one of two alternatives falling within the other prices determinant of supply. The other is a substitute-in-production. An increase in the price of one complement good causes an increase in supply for the other.
Complements-in-production are two or more goods that are jointly produced using a given resource. The production of one good automatically triggers the production of another, often as a bi-product. Both goods are simultaneously produced from the same resource. The production of one good does not exclude the production of the other, as would be the case for substitutes-in-production. In fact, it promotes the production of the other. Produce one, produce both.

Agricultural producers frequently generate bi-products when they produce a primary good, such as wheat and hay. Cattle ranchers produce both beef and leather from the same cattle resource. Lumber mills use timber resources to the produce two-by-fours and sawdust.

The price of a complement-in-production is part of the other prices supply determinant. A change in the price of a complement-in-production causes a change in supply and a shift of the supply curve. An increase in the price of one complement good causes an increase in the supply of the other. A decrease in the price of one complement good causes a decrease in the supply of the other.

Shifting the Supply Curve

To illustrate this process consider the simultaneous production of two goods--beef and leather. Each is jointly produced using the same cattle resources. When producers produce one, they produce both.

Complement-in-Production
Leather


How is the supply of leather affected if the price of beef should change?

  • A Higher Price: Suppose the price of beef increases. Profit-minded cattle ranchers undoubtedly react according to the law of supply and increase the quantity supplied of beef. However, in that this generates leather as a bi-product, more leather is automatically produced. The result is an increase in the supply of leather and a rightward shift of the supply curve. Click the [Price Increase] button to demonstrate.

  • A Lower Price: Suppose the price of beef decreases. Profit-minded cattle ranchers also likely react according to the law of supply and decrease the quantity supplied of beef. However, now there is less leather generated as a bi-product, with less leather automatically produced. The result is a decrease in the supply of leather and a leftward shift of the supply curve. Click the [Price Decrease] button to demonstrate.

<= COMPLEMENT-IN-CONSUMPTIONCOMPTROLLER OF THE CURRENCY =>


Recommended Citation:

COMPLEMENT-IN-PRODUCTION, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2022. [Accessed: May 17, 2022].


Check Out These Related Terms...

     | substitute-in-production | complement good | substitute good | substitute-in-consumption | complement-in-consumption | other prices, supply determinant | supply determinants |


Or For A Little Background...

     | supply | market supply | supply price | quantity supplied | law of supply | supply curve | change in supply | change in quantity supplied | ceteris paribus |


And For Further Study...

     | market | Marshallian cross | comparative statics | competition | competitive market | producer surplus | other prices, demand determinant | demand determinants |


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