Demand and Supply - Demand Shift pg-15

Complementary goods are goods which are consumed together or jointly. Examples of complementary goods include: salad and salad dressing, golf clubs and golf balls, hot dogs and mustard, pretzels and beer, MP3 players and computers and so on. Goods like salads and salad dressing, hot dogs and mustard, and pretzels and beer are complements only for those who enjoy them together. Golf clubs and golf balls, and MP3 players and computers are complements for the simple reason that these goods are required to be used together to obtain full functionality.23

Like substitute goods, complements are related in consumption. When the price of a good changes, it affects demand for other goods for which it is a complement. If the price of gasoline increases, sales of tires will probably fall as people drive less and thus wear our their tires more slowly. If green fees on a municipal golf course fall, more golf balls will probably be sold as people play golf more frequently and lose more golf balls. Based on these two examples we can see that when the price of a complementary good increases, demand falls (shifts back) for the other good and when the price of a complement decreases, demand increases (shifts out) for the other good.

Complementary goods are consumed together. In fact, it is helpful to think of a pair of complementary goods as representing a single good. If the price of a complement rises, the cost of consuming the combined good rises so less will be demanded; thus, the demand curve for the other good in the complementary pair will shift back (decrease). When the price of a complement falls, the total cost of the jointly consumed good has fallen so the demand curve for the other good will shift out (increase).

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Obviously, one doesn't require an MP3 player to enjoy most of the intended functionality of a computer, but a computer is necessary to fully use an MP3 player.

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