Good morning Ms. Teetaert and fellow classmates of economics
40S, today I will be talking about complimentary goods and substitute goods. Now
you may be asking yourself or maybe not what complimentary goods and substitute
goods are.
Complimentary goods are basically goods whose use is
interrelated with another associated good. And also demand for one good results
in the demand for the other good. You can pretty much see it like if you have
this product you need to have this other product with it for it to satisfy yourself, so pretty much they act like an addition to one another. An example for this
are cars and gasoline since you need to fuel your car with gas if you want to
drive the car.
Substitute goods are different goods that satisfy the same
consumer needs and since they satisfy the same needs, one could replace the
other. An example for this would be Coca-Cola
and pepsi since they pretty much taste the same and can easily replace one
another.
Complementary goods and substitute goods are known to easily
illustrate the difference between changes in quantity demanded and changes in
demand. For complementary goods, it shows this in a way that if for example the
price of a product decreases then there will be an increase in demand for that
product. If this product has a complementary good then that means that this
product requires the use of another product resulting in an increase in
quantity demanded for the product and an increase in demand for its
complementary product even if the price of the complementary product hasn't
changed. Although, if there is a decrease in quantity demanded for the product
then it will also cause a decrease in demand for its complementary product.
For substitute goods, it shows this in a way that for
instance there are two products that are similar and both satisfy the same
needs. If the price of one of the products decreases then there will be a
higher demand for that product which can then replace the other product. In other
words the decrease in price resulted in an increase of quantity demanded for that
product and a decrease in demand for the other product. Although if there is an
increase in price for that product then it would result in a decrease of
quantity demanded and an increase in demand for the other product.
Work Cited
"What Are Substitute Goods? Definition and Meaning."
Business Dictionary.com. Web. November 23, 2014.
<http%3A%2F%2Fwww.businessdictionary.com%2Fdefinition%2Fsubstitute-goods.html>.
"What Is Complementary Good? Definition and
Meaning." BusinessDictionary.com. Web. November 23, 2014.
<http://www.businessdictionary.com/definition/complementary-good.html>.
"Living Economics." : Complements and Substitutes
(transcript). Web. November 23, 2014.
<http://www.livingeconomics.org/article.asp?docId=289>.
