Google
Sunday 
January 21, 2018 

AmosWEB means Economics with a Touch of Whimsy!

AmosWEBWEB*pediaGLOSS*aramaECON*worldCLASS*portalQUIZ*tasticPED GuideXtra CrediteTutorA*PLS
BOARD OF GOVERNORS, CHAIRMAN: The head of the Federal Reserve Board of Governors and the Federal Reserve System. This is the guy in charge of monetary policy and is considered to be one of the two or three most powerful people in terms of the national and global economy. The Chairman is one of the seven members of the Board and serves as Chairman for a five-year term. The Fed Chairman also serves as Chairman of the powerful Federal Open Market Committee, the Fed Committee that sets the course of monetary policy.

Visit the GLOSS*arama


SUBSTITUTE-IN-PRODUCTION:

One of two (or more) goods that use the same resource for production in an exclusionary manner. A substitute-in-production is one of two alternatives falling within the other prices determinant of supply. The other is a complement-in-production. An increase in the price of one substitute good causes a decrease in supply for the other.
Substitutes-in-production are two or more goods that can be produced using the same resources. Producing one good prevents sellers from using resources to produce another. Produce one or produce the other, but not both.

Farmers are frequently faced with the production of substitute crops, such as corn or soybeans. Automobile companies must choose between the production of four-door sedans or pickup trucks. Building contractors devote their resources to the construction of multi-family apartment buildings or single-family houses.

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

Shifting the Supply Curve

To illustrate this process consider the production of two goods--sport shirts and window curtains. Each is produced using the same resources--workers, factories, tools, and materials. They produce one or they produce the other.

Substitute-in-Production

How is the supply of sport shirts affected if the price of window curtains should change?

  • A Higher Price: Suppose the price of window curtains increases. Profit-minded window curtain producers undoubtedly react according to the law of supply and increase the quantity supplied of window curtains. However, in that this requires additional resources, fewer are available to produce a substitute good, such as sport shirts. The result is a decrease in the supply for sport shirts and a leftward shift of the supply curve. Click the [Price Increase] button to demonstrate.

    The production substitution between window curtains and sport shirts is due to a change in relative prices triggered by the change in the price of window curtains, given that the price of sport shirts remains constant. That is, even though the price of sport shirts does not change, it is relatively cheaper due to the higher price of window curtains.


  • A Lower Price: Suppose the price of window curtains decreases. Profit-minded window curtain producers now react according to the law of supply and decrease the quantity supplied of window curtains. However, this frees up resources that can be used to produce a substitute good, such as sport shirts. The result is an increase in the supply for sport shirts and a rightward shift of the supply curve. Click the [Price Decrease] button to demonstrate.

    The production substitution between window curtains and sport shirts is once again due to a change in relative prices triggered by the price of window curtains, with no change in the price of sport shirts. That is, even though the price of sport shirts does not change, it is relatively more expensive due to the lower price of window curtains.


<= SUBSTITUTE-IN-CONSUMPTIONSUBSTITUTION EFFECT =>


Recommended Citation:

SUBSTITUTE-IN-PRODUCTION, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2018. [Accessed: January 21, 2018].


Check Out These Related Terms...

     | substitute-in-production | substitute good | complement good | complement-in-consumption | complement-in-production | 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 | elasticity | elasticity determinants |


Search Again?

Back to the WEB*pedia


APLS

GREEN LOGIGUIN
[What's This?]

Today, you are likely to spend a great deal of time watching infomercials hoping to buy either a coffee cup commemorating the moon landing or a how-to book on surfing the Internet. Be on the lookout for mail order catalogs with hidden messages.
Your Complete Scope

This isn't me! What am I?

Paper money used by the Commonwealth of Massachusetts prior to the U.S. Revolutionary War, which was issued against the dictates of Britain, was designed by patriot and silversmith, Paul Revere.
"The more you praise and celebrate your life, the more there is in life to celebrate."

-- Oprah Winfrey

QJE
Quarterly Journal of Economics
A PEDestrian's Guide
Xtra Credit
Tell us what you think about AmosWEB. Like what you see? Have suggestions for improvements? Let us know. Click the User Feedback link.

User Feedback



| AmosWEB | WEB*pedia | GLOSS*arama | ECON*world | CLASS*portal | QUIZ*tastic | PED Guide | Xtra Credit | eTutor | A*PLS |
| About Us | Terms of Use | Privacy Statement |

Thanks for visiting AmosWEB
Copyright ©2000-2018 AmosWEB*LLC
Send comments or questions to: WebMaster