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Complementary goods exhibit a negative cross elasticity of demand: as the price of goods Y rises, the demand for good X falls. In economics , a complementary good is a good whose appeal increases with the popularity of its complement.
Complementary goods are generally more inelastic than goods in a family of substitutes. For example, if a rise in the price of beef results in a decrease in the quantity of beef demanded, it is likely that the quantity of hamburger buns demanded will also drop, despite no change in buns' prices. This is because hamburger buns and beef (in ...
Aftermarket in economic literature refers to a secondary market for the goods and services that are complementary or related to the primary market goods, also known as original equipment). [1] [2] [3] In many industries, the primary market consists of durable goods, whereas the aftermarket consists of consumable or non-durable products or ...
Only if the two products satisfy the three conditions, will they be classified as close substitutes according to economic theory. The opposite of a substitute good is a complementary good, these are goods that are dependent on another. An example of complementary goods are cereal and milk. An example of substitute goods are tea and coffee.
Leontief utility functions represent complementary goods.For example: Suppose is the number of left shoes and the number of right shoes. A consumer can only use pairs of shoes.
The razor and blades business model [1] is a business model in which one item is sold at a low price (or given away) in order to increase sales of a complementary good, such as consumable supplies. It is different from loss leader marketing and product sample marketing , which do not depend on complementary products or services.
With respect to related goods, when the price of a good (e.g. a hamburger) rises, the demand curve for substitute goods (e.g. chicken) shifts out, while the demand curve for complementary goods (e.g. ketchup) shifts in (i.e. there is more demand for substitute goods as they become more attractive in terms of value for money, while demand for ...
Mathematically, the variable representing the price of the complementary good would have a negative coefficient in the demand function. For example, Q d = a - P - P g where Q is the quantity of automobiles demanded, P is the price of automobiles and P g is the price of gasoline. The other main category of related goods are substitutes.