a reduction in the price of oats leads to an increase in the supply of
wheat.
An excellent example in which two products are complements in
production is oil and natural gas, which are often found together below
Earth’s surface. If the market price of oil rises, producers will do more
drilling and increase their production of oil. But as more oil wells are
drilled, the usual outcome is that more of both natural gas and oil are
discovered and then produced. Thus, the rise in the price of oil leads to
an increase in the supply of the complementary product—natural gas.
- Significant Changes in Weather
Especially in the agricultural sector, significant changes in the weather
can lead to changes in supply. Drought, excessive rain, or flooding can all
massively reduce the supply of wheat and other crops growing in
temperate climates. In tropical locations, hurricanes can wipe out a coffee
or banana crop, and a cold snap or frost can decimate the supply of fruit.
Dramatic weather events can also reduce supply in industrial sectors.
Multiple hurricanes in the summer and fall of 2017 caused massive
damage to a wide range of industrial facilities in Florida, Puerto Rico, and
several Caribbean islands. In the summer of 2016 a massive wildfire
destroyed large parts of Fort McMurray, Alberta, and forced the
temporary closure of oil sands production facilities.
- Number of Suppliers