What Is A Complementary Good

Non all complementary goods are the same. There are 'weak' and 'strong' complementary goods. Weak complementary appurtenances respond to increases in prices in a very limited way. In other words, they are not responsive to increases in prices of complementary goods. However, there is some connectedness between the two.

If we take pancakes and maple syrup as an example – they are two complementary goods. Consumers utilise maple syrup with pancakes, only they likewise use other toppings. For instance, consumers may utilise bananas or sugar instead. Therefore, whilst maple syrup is used to complement pancakes, there are many other alternatives that brand the human relationship between the 2 weak.

If the price of maple syrup increases past 10 percent, just the demand for pancakes falls past 1 percent, the human relationship is therefore weak. This is because the price increase of the complementary product has fiddling consequence on the need on the other.

Strong Complementary Appurtenances have a close relationship with each other. That is to say that one skilful is reliant on the other to add value. For example, nosotros have a DVD and a DVD thespian. These are known as strong complementary appurtenances because they are pretty useless without 1 another.

The relationship between strong complementary goods is very elastic. In other words, when the price of DVD players rise, the demand for DVDs is likely to fall. So nosotros can say in that location is a 'negative cantankerous-elasticity' betwixt them. In fact, if yous expect at whatever production that could not exist sold by itself – information technology is probable a strong complementary good. So if you could only utilise Product 10 if you outset had Product Y, then they are potent complementary goods.

As we can come across from the graph beneath; when the cost of an iPhone decreases, the demand for iPhone cases increases. This is considering the demand for iPhones increases as more consumers are buying it at the lower prices. In plow, those aforementioned consumers are demanding iPhone cases – which translates into loftier sales.

Complementary Goods Graph

Complementary appurtenances are goods which rely on each other to add value. There are a big number of complementary goods which are necessary in order for the other to piece of work. For example, petrol is needed for cars to work. Nevertheless, there are also weak complementary goods that are not necessarily needed in order to role. An iPhone does not need a telephone case in lodge to work, but is yet classed every bit a complementary good. Other examples include: