August 29, 2015

Complementary Goods in Economy

Definition: Two or more goods that satisfy the wants or needs when consumed jointly or production of one good automatically triggers the production of other good. Satisfaction is greater when both goods are consumed together. (What are Substitute Goods?)

Features of Complement Goods:
Such goods have negative cross elasticity of demand. They will have a perfectly inelastic demand.
Goods cannot function without each other.
Dependent Nature & non-interchangeable

How do Price vary for Complement Goods?
If the price of one good rises, so will the price of the other, and vice versa. When two goods are complements, they experience joint demand.

Examples of Complement Goods:
Car & Petrol/Diesel
Printers and ink cartridges
DVD players and DVDs
Computer hardware and software,


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