Difference between revisions of "Complementary goods"
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| − | '''Complementary goods''' are commodities that depend on each other such that an increase in the price of one good causes a decrease in the demand for the related good. For example, an increase in the price of [[French toast]] could cause a decrease in the demand for [[maple syrup]], because those two goods are often consumed together. An increase in the price of [[salad dressing]] could cause a decrease in demand for [[salad]]. Thus, complementary goods will always have a negative cross | + | '''Complementary goods''' are commodities that depend on each other such that an increase in the [[price]] of one good causes a decrease in the [[demand]] for the related good. For example, an increase in the price of [[French toast]] could cause a decrease in the demand for [[maple syrup]], because those two goods are often consumed together. An increase in the price of [[salad dressing]] could cause a decrease in demand for [[salad]]. Thus, complementary goods will always have a negative cross elasticity of demand (% change in demand for good A divided by % change in price of good B) |
Complementary goods are the opposite of [[substitute goods]]. | Complementary goods are the opposite of [[substitute goods]]. | ||
[[Category:Economics]] | [[Category:Economics]] | ||
Latest revision as of 20:47, May 23, 2007
Complementary goods are commodities that depend on each other such that an increase in the price of one good causes a decrease in the demand for the related good. For example, an increase in the price of French toast could cause a decrease in the demand for maple syrup, because those two goods are often consumed together. An increase in the price of salad dressing could cause a decrease in demand for salad. Thus, complementary goods will always have a negative cross elasticity of demand (% change in demand for good A divided by % change in price of good B)
Complementary goods are the opposite of substitute goods.