Assuming that the demand for wool increases, as shown by the upward slide of the D-in-D1 demand curve. It will increase the price of wool to P1w and increase its supply from Q1w. However, the increase in the supply of wool due to the increase in the price of demand would not lead to a proportional increase in the supply of mutton. The case of joint demand for goods from producers is called derived demand, because the demand for any factor is a demand derived from the final product that that factor contributes to produce. The demand for labour is a derived demand. It depends on the demand for the product for which it helps to manufacture it. Figure 2 (A) illustrates the case of a decline in motor vehicle demand from OQ to OQ1, with the resulting decrease in gasoline demand from OQ to OQ1, as shown in Panel (B). These two figures also show the decline in car and petrol prices, from OP to OP1. The extent to which these prices will change will depend on the degree of elasticity of demand for products, coupled with the degree of scarcity or fullness. This is a situation in which the delivery of two or more goods is inseparable.
The increase or decrease in the supply of one of the products leads to a simultaneous increase or decrease in the delivery of the other goods. Increasing the supply of cows, for example, simultaneously increases the supply of milk and meat on the market. Thus, milk and meat prices are influenced by farmers raising more cows. However, the demand for goods delivered in common must not be reasonable with the available supply of each of the products. Demand for milk may, for example, be higher than for meat in some markets. There are a number of products that have a common source of supply, as they are made jointly. The production of one automatically involves the production of another, such as wool and sheep meat, wheat and straw, cotton and cotton seeds, etc. Articulated products are also called joint cost products.
We are looking at a coordination issue for option contracts in a two-slope supply chain that optimizes the product selling price, option price, options exercise price, and order quantity. Market demand is random and sensitive to the retail price of the product. Our analyses take into account two types of contracts. One is a conventional option contract in which the supplier determines the option price and the exercise price and the retailer the selling price of the product and the order quantity. Two cases are examined with regard to the supplier`s decisions: (1) The supplier has the exercise price of the option as the decision variable and (2) has both the option price and the exercise price of the option as the decision variable. The other type of contract is an option contract with a common pricing mechanism, in which two actors in the supply chain establish a relationship between the exercise price of the option and the retail price of the product. For both types of contracts, we are developing a Newsvendor model to study the impact of common pricing on supply chain coordination and decisions. We use sequential procedures to determine the best decisions for supply chain actors, including the retailer`s order quantity and retail price as well as the option exercise price set by the supplier. . . .