Complementary goods are materials or products whose use is connected with the use of a related or paired commodity in a manner that demand for one generates demand for the other. Examples of such goods include: DVD player and DVD disks, mobile phones and recharge cards, cars and petrol, printers and ink cartridges, boots and laces, computer hardware and computer software, and tennis balls and tennis rackets.Continue Reading
A complementary good has a negative cross elasticity. If the price of one good falls so that people buy more of it, then more of the complementary good will be purchased, whether or not the price falls. At the same time, a rise in the price of one good reduces its demand; the demand for the paired good will reduce as well. When somebody purchases a computer, they will automatically need software such as Microsoft office, wireless drivers and specialized accounting programs.
The purchase of a DVD player has the complementary good being DVDs. This is changing, though, with the changing technology, where DVD players are being used to stream movies and television shows using such services as Netflix, which may be considered the new complement.
Another example of complementary goods is a mobile phone and recharge cards. When prices of mobile phones increase so that few people can afford the devices, demand for recharge cards will also fall. The opposite of a complementary good is a substitute good. This implies that demand for a good increases when the price of another good increase, for example coffee and tea.Learn more about Economics