Complementary Goods and Demand

Complementary Goods

  • Complementary goods are items that are used together.

    • Examples:
      • Prescription glasses: lenses and frames
      • Shoes: left and right shoe
      • Electronics: computers and chargers, smartphones and smartphone cases
      • Accessories: hairpins and hairbands
      • Coffee: coffee beans and coffee cups

  • Impact of Price Increase of Complements:

    • If the price of a complementary good increases, the cost of using the related good also increases.

    • Example: iPhones and iPhone Cases

      • If the price of iPhones increases, consumers will buy fewer iPhones.

      • Consequently, even if the price of iPhone cases remains unchanged, the demand for iPhone cases will decrease because fewer people are buying iPhones.

  • Electric Vehicles (EVs) and Charging Costs:

    • Example: Electric Vehicles and Charging

      • Initially, many shopping centers and office buildings offered free EV charging, which incentivized some people to switch from petrol vehicles to EVs.

      • When these locations started charging for EV charging, the overall cost of using an electric vehicle increased.

  • Price of Related Goods:

    • The impact of price changes depends on whether the related goods are substitutes or complements.

Factors Affecting Demand

  • Factors influencing demand can cause the demand curve to shift left or right.

Change in Quantity Demanded vs. Change in Demand

  • Activity: Illustrate four different scenarios with graphs to demonstrate the changes occurring.