A Beef Boom Hits the Leather Market
Ranchers raise more cattle for beef, and because hides come with the beef, the supply of leather shifts right.
A Beef Boom Hits the Leather Market
Supply and DemandRanchers raise more cattle for beef, and because hides come with the beef, the supply of leather shifts right.
Equilibrium at Quantity 57, Price ($) 44
Start in equilibrium
The market for leather begins in equilibrium where supply meets demand. Leather comes from cattle hides, so this market is tied to what happens in the beef market.
Now try it yourself: shift the curves in a graded FRQ drill, or open this graph in the free sandbox.
Students predict what happens before the graph moves. No accounts, nothing graded.
A Beef Boom Hits the Leather Market, step by step
- 1
Start in equilibrium
The market for leather begins in equilibrium where supply meets demand. Leather comes from cattle hides, so this market is tied to what happens in the beef market.
- 2
Ranchers raise more cattle
Strong beef prices lead ranchers to raise far more cattle. Beef and hides are complements in production: making one automatically makes the other. More hides reach tanneries at every leather price, so supply shifts right.
- 3
A surplus appears
At the original leather price, sellers now offer more hides than buyers want. That surplus of unsold leather is what pushes the price down.
- 4
New equilibrium
As the price falls, more buyers step in and move down along the unchanged demand curve, until the surplus clears. Leather settles at a lower price and a larger quantity than before.
- 5
Compare it with substitutes in production
Complements in production move together: more beef means more leather. Substitutes in production trade off against each other, because land or machines devoted to one cannot make the other. Work out which relationship links the two goods first, because that is what sets the direction of the shift.
Where it ends up
When output of a complement in production rises, supply of the joint product shifts right, so the equilibrium price of leather falls and the equilibrium quantity rises.
Now draw it yourself
Same graph, graded on whether you move the right curve and leave the rest alone.
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