Complementary Goods

Complementary goods is a concept of two good that complement each other to make it simple, when there are changes in the sale or production of one product due to the change in price of another product. They can be complementary either in the process of consumption or in the process of production.

 

Complementary Goods In Case Of Consumption

They are those goods that make the people happy when they are given in a combined way. The level of satisfaction is more in the case of consumption of both these goods together than when they are purchased separately. It so happens that the consumers would want to buy these goods to be bought together or neither of them is bought at all.

 

Complementary Goods In Case Of Production

This is another possible scenario for the case of the complementary goods. These are products probably from the same resources. These are goods which are produced in such a way that the by product itself would trigger the production of the other good in a way. This is the concept with the case of complementary goods in the case of production.

It is very much essential to know how the quantity in demand for a certain good can change with the change in price for the complementary good. This can be demonstrated easily with the help of the graph above.

Let us take an example of the following scenario. Consider a company that is a famous petroleum agency. It is also involved in the production of the cars. In this case, the increase in the price of the petroleum would decrease the quantity in demand for the cars. This way the complementary good can affect the trade of the product in Question. This can also be talked about in the case of the decrease in price of the complementary good. If that is the case, the demand for cars in the market would be increased. This is the way the complementary goods act.

 

Let us take another example.

In case of a food product and some drink with it, both foods are usually bought together to make the meal a good one. In case the person wants to eat more of the product, he would want to get more of the complementary food that is the drink here. It holds good the other way round too. The lesser the consumer wants to eat, lesser would be the requirement for the complementary drink too.