WAEC Economics 2020 Theory — Question 7

Model answer

(a) Competitive demand is the type of demand when two products (say X and Y) are oppositely demanded. That is, if the demand for X increases for instance, the demand for Y will decrease and vice versa. Meanwhile, joint demand is the type of demand when two products are demanded together. In this case, the products cannot be separately demanded. An example of such demand is tin and milk. (b)(i) Effect of increase in price of complement: leads to a decrease in demand for the related good (since both goods are used together, a rise in the price of one reduces demand for both). (ii) Effect of increase in price of substitute: leads to an increase in demand for the related good (as consumers switch away from the now more expensive substitute). (iii) Effect of imposition of an indirect tax: increases the cost of production and price of the good, generally leading to a decrease in the quantity demanded/supplied.