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,

Flashlight and battery

Also Read:

• Public Goods, Merit Goods, Demerit Goods, Private Goods & Free Goods
• Indifference Curve
• 1991 Economic Reforms in Indian Economy(TM)
• Important Committees formed in relation to Indian Economy(TM)
• Repo Rate, Reverse Repo, Uses, Pricing & Types of Repo Explained
• Different Types of Banks in Indian Economic System
• Reserve Bank of India (RBI) & Its Functions: Promotional & Supervisory Explained
• Neethi Aayog - Structure & Functions (TM)

Advertisements