Complementary and Substitute Goods
Complementary Goods are usually brought in tandem, for example DVDs and DVD players, PC and keyboards, duvets and duvet covers. Therefore if the price of one good was to fall, we would expect its quantity demand to expand; along with the demand of its complementary good to positively shift (rightwards) and vice versa.
On the other hand substitute goods are rarely bough in tandem, and are usually competitor products, for example an IPod or MP3, a Blackberry or IPhone, a Mac or Windows. Therefore if the price of one good was to fall we would expect that good’s quantity demanded to expand; whereas the substitute good we would expect to see it demand shift negatively (as there isn’t a price change, but another factor).
Page last updated on 20/10/13
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