Economics – Demand and supply curves | e-Consult

A complementary good is a good that is typically consumed with another good (e.g., coffee and milk, printers and ink cartridges). A change in the price of a complementary good affects the demand curve for the original product. If the price of a complementary good increases, the demand curve for the original product shifts to the left. This is because the combined effect of the higher price of the complementary good and the reduced consumption of that good leads to lower demand for the original product. Conversely, if the price of a complementary good decreases, the demand curve for the original product shifts to the right.

Diagram: The diagram would show two overlapping demand curves – one for the original product and one for the complementary good. A change in the price of the complementary good would be indicated by a shift in the demand curve for the original product. A rightward shift would be shown with an increase in demand, and a leftward shift with a decrease in demand.

Implications for businesses: Businesses selling the original product need to carefully consider the price changes of their complementary goods. If the price of a complementary good increases, the business may experience a decrease in demand for its product. They might need to adjust their pricing strategy, offer discounts on the original product, or explore alternative marketing strategies to mitigate the impact. Conversely, if the price of a complementary good decreases, the business may benefit from increased demand for its product. Businesses might consider increasing production, expanding their marketing efforts, or developing new products that complement the original product.