Complement Good

According to Economics, The term "complement good" refers to a product or service whose use is related to the use of an associated or paired well. A pair of products forming a complementary pair are so correlated that an increase in the price of one can cause a decline in the demand of both the products. On the other hand, substitutes are exactly opposite to complement goods.

What Is a Complement Good?

A complementary good or complement refers to a product or service that produces a more desirable benefit when used together with another product or service. In other words, a complementary good is a product or service which must necessarily be used together with another product or service for it to function. When two products are used as a pair, they are considered as complements of each other.

General Examples of Complement Goods

You can find a lot of examples of complement goods around you. For instance, you plan to go to a tennis match with your cousins. The tennis racket and tennis ball that you'll need are examples of complementary goods. Suppose you need to travel to reach the tennis court. Your car and its fuel that'll help you get there in time are other examples of complementary goods. Apart from these, other examples of such goods are:

• Snowboard boots and snowboarding products
• Game consoles and game 

Difference Between Substitute Goods and Complementary Goods

As mentioned earlier, complementary goods are such products that are often used together. In the case of complementary goods, a positive change in the demand for one product results in the negative change in the demand of others. Let us take the example of computers and software. Here, if the price of computers declines, it would result in an increased demand for software.

On the other hand, substitutes are such goods that can be used in place of each other. In other words, if a price increase for one product leads to a rise in demand for a related good, then the two goods are called substitutes. For instance, an increase in ice cream prices, for example, followed by a higher demand for frozen yogurt, indicates that frozen yogurt represents a substitute good for ice cream.

What Is the Perfect Complement?

Now that you know what complementary goods or complements are let's move on to perfect complements.

Wondering what we are talking about?

Well, perfect complements are goods which only provide utility when they are consumed together. Such products, if not consumed together, won't provide you with satisfaction or happiness. In a way, perfect complements are two goods that are incomplete without each other and have no use if used only as a single good. Perfect complements are different from normal complementary goods in that they only provide utility if consumed together whereas you can consume complements individually. Some of the best examples include:

• A pair of shoes
• Portable gaming devices and batteries
• Computers and software

Complements and Elasticity

Nonetheless, complementary goods got together. So an increase in the price of one may decrease the demand for the other. This is called intertwining of demand. However, the strength of the intertwining of demands depends on how related the two complementary goods are.

Let us understand the concept better with the help of a peanut butter and jelly sandwich. In this sandwich, peanut butter is a complementary good to jelly. Since the two are correlated, so, if peanut butter costs a lot more, some people will choose to buy less jelly, but others will drop the idea of buying peanut butter and only use jelly on their toast.  On the other hand, if the price of printers increases, the demand for ink cartridges may decrease. That's because printers cannot be used without ink cartridges. In this case, the demand is tightly intertwined.

This demand intertwining is referred to as elasticity of demand. If two complementary goods are strongly correlated, they will have a perfectly inelastic demand — for instance, computers and software and a bike frame and bike wheels.

How to Determine If Two Goods Are Complements or Substitutes?

Wondering how you can figure out whether two goods are complements or substitutes? Well, it's quite easy. You need to consider specific requirements for both complementary products and substitutes.

Two goods can be considered as substitutes if:

• An increase in the price of one increases the demand for another.
• Both the goods are grouped in a similar category of products.

On the other hand, two goods are said to be complements if:

• The use of one depends upon the other.
• If the increase in the price of one decreases the demand for the other.

So, this was a quick description of “complementary goods”. Economists around the globe and students pursuing a higher degree in Economics have to study concepts like these in detail. That’s important for a better understanding of concepts and a better performance in academics. However, students may sometimes fail in getting a clear understanding of such concepts. Reasons may vary from bunked lectures to personal mishaps. What adds to their woes is an added responsibility of academic writing tasks like essays and assignments on economics topics like “complement goods”, “substitute goods”, “elasticity” and so on. Though performing good in academics requires hard work, self-study, and meaningful guidance. Students around the globe can rely on their professors, books from top experts, online resources and online academic writing services for the right kind of guidance.

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References:

• https://bizfluent.com/facts-5607033-difference-between-complementary-substitute-economics.html
• https://courses.lumenlearning.com/boundless-economics/chapter/other-demand-elasticities/