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Difficulty: MediumTypes of Supply

A petroleum refinery operating in Rivers State processes crude oil through fractional distillation, resulting in the simultaneous production of premium motor spirit (petrol) and bitumen from the same refining process. An increase in the output of petrol automatically leads to an increase in the output of bitumen. Which type of supply is demonstrated in this scenario?

  1. Joint supplyAnswer
  2. B
    Competitive supply
  3. C
    Composite supply
  4. D
    Derived supply

Answer

Joint supply
Joint supply (also known as complementary supply) occurs when two or more goods are produced simultaneously from the same raw material or production process. Because petrol and bitumen are co-products of refining crude oil, an increase in petrol production inherently expands the supply of bitumen.

Step-by-Step Solution

1
Analyze the production process described in the scenario.
Petrol and bitumen are yielded simultaneously from a single origin (crude oil via fractional distillation).
Identifying whether products originate concurrently from one process determines the supply relationship.
2
Evaluate the directional output relationship between the two products.
Increasing petrol output automatically yields additional bitumen.
When products are joint outputs of a single process, expanding production of one increases the supply of the co-product.
3
Match the economic situation to the definition of supply types.
The relationship is classified as joint (or complementary) supply.
Joint supply specifically defines co-products generated together from the same raw material source.

Key Concept

Joint (Complementary) Supply
Estimated Time:1m 0s
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Topics

Types of Supply

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