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Question

Difficulty: MediumTypes of Supply

A commercial farmer in Kaduna State owns a fixed 10-hectare plot of arable land that can be used to cultivate either maize or soybeans. Following a sharp increase in the market price of maize, the farmer reallocates 8 hectares to maize production, which leads to a direct reduction in the market supply of soybeans.

Which type of supply relationship is illustrated between maize and soybeans in this scenario?

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

Answer

Competitive supply
The scenario describes competitive supply (also known as alternative supply), which occurs when two or more commodities compete for the use of the same limited productive resource (in this case, arable land). Because the land input is fixed, allocating more resources to increase the output of maize leaves fewer resources for soybeans, causing the supply of soybeans to fall.

Step-by-Step Solution

1
Analyze the production constraint in the scenario
Identified that the land resource (10 hectares) is fixed and shared as an input for producing either maize or soybeans.
Determining whether products share a common resource or come from the same process is critical for defining the supply type.
2
Evaluate the impact of reallocating resources
Increasing land allocation to maize automatically reduced the land available for soybeans, lowering soybean supply.
When products compete for the same input, increasing the supply of one reduces the supply of the other.
3
Match the economic relationship to supply definitions
This inverse supply relationship caused by competition for factor inputs defines competitive supply.
Competitive supply (or alternative supply) specifically describes goods competing for identical factor inputs.

Key Concept

Competitive Supply
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Topics

Types of Supply

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