What do understand by complementary goods

Answer :

Complementary goods are those goods which are used jointly or consumed together like car and petrol, gas and gas stoves, pen and ink.

In case of such goods increase in the price of one causes decrease in demand for the other and decrease in the price of one cause the increase in the demand for the other.

Complementary goods show indirect relation between each other i.e. quantity demanded of one good is inversely related to the change in the price of the other good. For example if the price of petrol rises, its demand will fall (as price of a commodity rises its demand started falling), as a result demand for car will also fall(as both are jointly used).

Conversely, if the price of petrol falls, its demand will rise, also will rise the demand for car.

Price of petrol- rises , demand for cars- falls

Price of petrol- falls , demand for cars- rises

( Read: factors affecting demand- substitute goods )

Factors affecting demand

We discuss below some of the important determinants of demand for a commodity:

1)  Price of the commodity:
Normally there is an inverse relationship between the price of the commodity and the quantity demanded this means that lower the price of the commodity, larger is the quantity demanded and higher the price, lesser is the quantity demanded.
Price- rises ,   demand- falls
Price-falls   ,   demand- rises

2)Income of the consumer :
Income determines the purchasing of the consumer. Generally there is a direct relationship between the income of the consumer and his demand for a product.
Income- rises  ,    demand- rises.

However, this may not always be the case. Let see the relation between income and three different types of commodities consumed.

a) Normal goods: normal goods are those goods the demand for which increases with increase in income of the consumers and decreases with fall in income for example demand for clothes, refrigerator, television, cars etc.

 Effect of change in consumer’s income on normal goods

normal goods

The above figure shows the income of the consumer plotted on y-axis and the quantity purchased of a commodity is plotted on x-axis. The nature of relation between income and demand for normal goods is shown by OA curve.