5 difference between substitute goods and complementary goods
Answers
Complementary goods: meaning of complementary is ‘useful or attractive together’. These are the goods which used together. Increase/ decrease in demand for one good will increase/decrease demand for other good also.
Ex: car and petrol, mobiles and mobile covers etc
Substitute goods: substitute goods have inverse relationship to each other i.e Increase in price of one good will decrease the consumption of that particular good and demand for another good increases.
Ex: increase in price of coffee makes people to have tea instead of coffee.
The five differences between the substitute goods and complimentary goods are :
1. Substitute goods are independent to each other while as complementary goods are inter-dependent.
2. If the price of one good increases, the demand of its substitute good increases while on the other hand if the price of good increases, the demand its complementary good decreases.
3. Cross elasticity of the substitute goods will be positive while as cross elasticity of complementary goods is negative.
4. Tea and Coffee is an example of substitute goods while as car and petroleum is an example of complementary goods.
5. Complementary goods are mostly sold in combination while as substitute goods are mostly sold in singularity.