Google
Saturday 
June 25, 2022 

AmosWEB means Economics with a Touch of Whimsy!

AmosWEBWEB*pediaGLOSS*aramaECON*worldCLASS*portalQUIZ*tasticPED GuideXtra CrediteTutorA*PLS
LEGAL RESERVES: The total amount of vault cash or Federal Reserve deposits of a bank. These are the only bank assets that can be used legally to satisfy reserve requirements.

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, 2000-2022. [Accessed: June 25, 2022].


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

BLUE PLACIDOLA
[What's This?]

Today, you are likely to spend a great deal of time watching the shopping channel trying to buy either a birthday gift for your father that doesn't look like every other birthday gift for your father or a green fountain pen. Be on the lookout for poorly written technical manuals.
Your Complete Scope

This isn't me! What am I?

The 22.6% decline in stock prices on October 19, 1987 was larger than the infamous 12.8% decline on October 29, 1929.
"It is not fair to ask of others what you are unwilling to do yourself. "

-- Eleanor Roosevelt, diplomat, activist

BQ
Basic Qoute
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 ©2000-2022 AmosWEB*LLC
Send comments or questions to: WebMaster