Complementary Goods in Economics: Definition & Examples

Complementary Goods in Economics: Definition & Examples
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Instructor: Aaron Hill

Aaron has worked in the financial industry for 14 years and has Accounting & Economics degree and masters in Business Administration. He is an accredited wealth manager.

Do the sales of one good affect the sales of another? Does the laptop I just purchased have a complementary good? Learn what complementary goods are and read about some easy-to-remember examples.

Definition of Complementary Goods

A complementary good is a good whose use is related to the use of an associated or paired good. Two goods (A and B) are complementary if using more of good A requires the use of more of good B.

For example, the demand for one good (printers) generates demand for the other (ink cartridges). If the price of one good falls and people buy more of it, they will usually buy more of the complementary good also, whether or not its price also falls. Similarly, if the price of one good rises and reduces its demand, it may reduce the demand for the paired or complementary good as well.

In economics, you may often hear about substitute goods. These are the opposite of complementary goods and are a whole other topic by themselves. For instance, Microsoft Windows-based personal computers and Apple Macs are substitutes. If you buy one, you probably don't buy the other. Sprite and 7-UP are another example of substitute goods.

Examples of Complementary Goods

When you go to Best Buy to get a new computer, what usually happens? You end up buying some software or programs to go with it. You might find out that you need Microsoft Office or a specialized accounting software for your business. The new computer alone won't get the job done; you need the complementary software also!

A common example, but changing a little with newer technology, is the DVD player and DVD complement. When you get the new DVD player for Christmas, you usually are hoping for one of your favorite DVDs to go along with it. As technology changes, so may the complements of particular goods and services. Previously, DVD players simply played DVDs. Now, consumers can use this device to stream movies and television shows, so a new complement good to these systems might be a streaming service, such as Netflix.

Those of you with kids - or at least childlike taste buds - should relate to this example. Taking a trip to the grocery store to pick up peanut butter usually results in grabbing the strawberry or grape jelly to go along with it. If the price of peanut butter goes up and less people buy it, there is a strong chance that sales of jelly will also fall.

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