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

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.