Question

What is meant by complementary goods?

Hint:

Complementary goods are consumed together, so a price decrease in one increases demand for the other.

Answer 1

Step 1: Defining Complementary Goods:
Complementary goods are goods that are consumed together, meaning that the demand for one good is directly related to the demand for another. When the price of one good decreases, the demand for the complementary good increases, and vice versa. This relationship is typically based on the fact that these goods are used together to provide a certain utility.
Step 2: Examples of Complementary Goods:
- Coffee and Sugar: When a person buys coffee, they may also purchase sugar. If the price of coffee decreases, more people will buy coffee, leading to an increase in the demand for sugar.
- Printers and Ink Cartridges: The demand for ink cartridges is directly linked to the demand for printers. If more printers are sold, the demand for ink cartridges will increase.
Step 3: Final Conclusion:
Complementary goods are typically used together, and a change in the price of one good can affect the demand for its complement.