Question

What is complementary good? Give examples.

Hint:

Complementary goods tend to have an inverse relationship in terms of demand—when one’s demand increases, the demand for the other generally increases as well.

Answer 1

A complementary good is a product that is used together with another product. The demand for one good is directly related to the demand for the other. In other words, if the price of one good increases, the demand for its complement will generally decrease, and vice versa. Complementary goods often have a negative cross-price elasticity of demand.

Step 1: Characteristics of Complementary Goods.
Complementary goods are typically consumed together, and they enhance the utility or enjoyment of each other. They are often sold together in bundles. Examples include:
- Cars and gasoline: The demand for gasoline rises with the demand for cars.
- Printers and ink cartridges: The demand for ink cartridges rises with the sale of printers.

Step 2: Conclusion.
Complementary goods are those that are consumed together, and their prices are often linked in such a way that a change in the price of one good can affect the demand for the other.