An increase in the price of commodity X led to a fall in the supply of commodity Y. Commodities X and Y are

Analyze the question

The price of X rises, and as a result the supply of Y falls. We need to decide what relationship between X and Y produces this effect.

Concept: Relationships in supply

• Competitive supply (goods in competitive supply): The same resources (land, labour, capital) can be used to produce either good. If the price of X rises, producers shift resources to X, so the supply of Y falls. Example: yam and cassava grown on the same farmland.
• Joint supply: The goods are produced together, so an increase in the price of one raises its output, and the supply of the other rises too. Example: beef and hides, or crude oil and natural gas.
• Composite supply: One good has several uses, such as milk used for cheese, butter or yoghurt. A rise in demand for one use reduces the supply available for the others.
• Derived demand/supply: A good is wanted because of what it helps produce, such as cement for building.

Step-by-step solution

1. Price of X rises, so producers find X more profitable.
2. Producers move resources away from Y into X.
3. Supply of Y falls.
4. This is the pattern of competitive supply, meaning X and Y compete for the same resources.

Joint supply would give the opposite result: Y's supply would rise. Derived goods do not describe a supply relationship like this. Composite goods (composite supply) could loosely cause a fall in one use when another use gets more, but that describes one product with multiple uses, not two different commodities X and Y.

Answer: The two commodities are in competitive supply, so the correct option is A. competitive goods.

Exam tip: Remember the "direction rule":

• Price of X up → supply of Y down = competitive
• Price of X up → supply of Y up = joint