Question

Practical importance of complementary goods

Answer 1

An example of this would be the demand for cars and petrol. The supply and demand of cars is represented by the figure at the right with the initial demand D1. Suppose that the initial price of cars is represented by P1 with a quantity demanded of Q1. If the price of petrol were to decrease by some amount, this would result in a higher quantity of cars demanded. This higher quantity demanded would cause the demand curve to shift rightward to a new position D2. Assuming a constant supply curve S of cars, the new increased quantity demanded will be at D2 with a new increased price P2. Other examples include: Automobile and fuel, mobile phone and cellular service provider, Printer and Cartridge among others.

Answer 2

Answer:

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• A complementary good is a good that adds value to another, or, a good that cannot be used without each other. Complementary goods that cannot be used without each other are known to have a strong relationship. In other words, when the price goes up on one, the demand goes down for the other good.