Complementary good
[further explanation needed] Technically, it displays a negative cross elasticity of demand and that demand for it increases when the price of another good decreases.
will result in a negative movement along the demand curve of
will result in a positive movement along the demand curve of
Therefore, if a higher quantity is demanded of one good, a higher quantity will also be demanded of the other, and vice versa.
[3] Another example is that sometimes a toothbrush is packaged free with toothpaste.
All non-complementary goods can be considered substitutes.
are rough complements in an everyday sense, then consumers are willing to pay more for each marginal unit of good
The opposite is true for substitutes: the consumer is willing to pay less for each marginal unit of good "
Complementarity may be driven by psychological processes in which the consumption of one good (e.g., cola) stimulates demand for its complements (e.g., a cheeseburger).
Consumption of a food or beverage activates a goal to consume its complements: foods that consumers believe would taste better together.
Drinking cola increases consumers' willingness to pay for a cheeseburger.
This effect appears to be contingent on consumer perceptions of these relationships rather than their sensory properties.
Suppose that the initial price of cars is represented by
If the price of petrol were to decrease by some amount, this would result in a higher quantity of cars demanded.
Assuming a constant supply curve
Other examples include automobiles and fuel, mobile phones and cellular service, printer and cartridge, among others.
The indifference curve of a perfect complement exhibits a right angle, as illustrated by the figure.
[6] Such preferences can be represented by a Leontief utility function.
Few goods behave as perfect complements.
The degree of complementarity, however, does not have to be mutual; it can be measured by the cross price elasticity of demand.
In the case of video games, a specific video game (the complement good) has to be consumed with a video game console (the base good).
It allows vendor lock-in by increasing switching costs.
A few types of pricing strategy exist for a complementary good and its base good: Sometimes the complement-relationship between two goods is not intuitive and must be verified by inspecting the cross-elasticity of demand using market data.
Mosak's definition states "a good
denotes the ordinary individual demand for a certain good."
[7] The standard Hicks decomposition of the effect on the ordinary demand for a good
of a simple price change in a good
By the symmetry of Mosak's perspective, evaluating the equation with respect to
, the first term of right-hand side stays the same while some extreme cases exist where
is large enough to make the whole right-hand-side negative.
