Related goods are either substitutes or complementary
Substitutes Goods : When price of a substitute falls, it becomes cheaper than the given good. So the consumer substitutes it for given good will decrease. Similarly, a rise in the price of substitute will result in increase in the demand for given good. For example : – Tea and Coffee.
Complementary Goods : When the price of a complementary good falls its demand rises and the demand for the given good will increase. Similarly when price of complementary good increases, then demand for given good decreases. For example : – Car & Petrol.
Explain how the demand for a good is affected by the price of its related goods. Give examples.
Answers
Sheetal Parihar
Related goods are either substitutes or complementary
Substitutes Goods : When price of a substitute falls, it becomes cheaper than the given good. So the consumer substitutes it for given good will decrease. Similarly, a rise in the price of substitute will result in increase in the demand for given good.
For example : – Tea and Coffee.
Complementary Goods : When the price of a complementary good falls its demand rises and the demand for the given good will increase. Similarly when price of complementary good increases, then demand for given good decreases.
For example : – Car & Petrol.