3. Supply and Demand
Shifting Demand
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Now let's discuss how another related good, a complementary good can affect the demand for a product. So just like with substitute goods, complementary goods also can affect our demand here. So complementary goods, they're things that are usually bought together, Things that you buy together. Alright. We'll do some examples in a second, but the idea here is that when the price of good X goes up, then the demand of good y is going to decrease. Alright. And this is because they usually buy the things together. So if the price of one of the things goes up, they're gonna be like hey, maybe I won't buy these things. You see? And I'll buy something else. Cool. So just like where we had directly proportional, now we're going to define inversely proportional. So these are variables that move inversely to each other so when one goes up, the other goes down and vice versa. When one goes down, the other goes up. So you'll see here with complementary goods that's exactly what's happening. The price of one good is going up and the demand of the other good is going down. They have an inverse relationship, an inversely proportional relationship. Sometimes you just say inverse relationship and it gets the same point. Again, just like with substitute goods, we're not talking about a change in price, right? This is the change in price of another product, of a different product and it's affecting the demand of the product we are analyzing. Again in this situation, we're analyzing Cool, let Cool. Let's do some of these examples. What are some examples of complementary products? So first one, a really common one that you see is peanut butter and jelly, right. These are things that are generally bought together. So what if the price of peanut butter what if the price of peanut butter were to go up? Well, then the demand for jelly is gonna go down. Right? And that makes sense. Right? Because they buy them together well, peanut butter is more expensive, maybe I just won't buy these things. So then the demand for the jelly goes down because of that price rise of peanut butter. How about DVD players and DVDs? These are compliments as well. If the price of a player, say goes down in this situation of the player, what's gonna happen to the demand for DVDs? Well the demand for DVDs is gonna go up in this case, right. Same logic applies there because they usually bought together, they're going to, more likely buy DVDs now that the price of the players is cheaper. Last one here, let me get out of the way, we've got cars and gasoline. Same kind of logic. So let's say the price of a car goes up, then the demand for gasoline is going to go down. Cool? So you can see that a lot of times and you're gonna see this in the upcoming lessons, there is a kind of a logical approach you can take here. You can kinda just use your intuition to think about how these products are gonna affect each other. Cool. Let's go ahead and do an example.