when two goods are compliments course hero

What is the relationship between complementary goods?

Feb 06, 2017 · When two goods are complements, the more consumers buy of one, the more they will buy of the other. A decrease in the price of a complement causes the demand curve for a good to shift to the right. An increase in the price of a complement causes the demand curve for a good to shift to the left.

What are ‘weak’ and ‘strong’ complementary goods?

When two goods are complements, a shock that lowers the price of one good causes the price of the other good to increase. This is explained by the fact that the use of one good requires the use of more of the other good if the two are complementary meaning that the demand of one good creates the demand for the other one.

Is your product a strong complementary good?

Two goods are perfect complements when the indifference curves for the goods are shaped as right angles Example: If you have 1 left shoe and 1 right shoe, you are indifferent between having more left shoes only Must have one right for one left 46 Consumer Preferences Right Shoes Left Shoes 2 3 4 1 1 2 3 4 0 Perfect Complements

What happens when the price of a complementary product increases?

Jun 14, 2017 · Two goods are complements when a decrease in the price of one good a. decreases the quantity demanded of the other good. b. decreases the demand for the other good. c. increases the quantity demanded of the other good. d. …

What is a strong complementary good?

Strong Complementary Goods. Strong Complementary Goods have a close relationship with each other. That is to say that one good is reliant on the other to add value. For example, we have a DVD and a DVD player. These are known as strong complementary goods because they are pretty useless without one another.

What are substitute goods?

Substitute goods are two goods that can be used i n place of one another, for example, Dominos and Pizza Hut. By contrast, complementary goods are those that are used with each other. For example, pancakes and maple syrup.

Why does demand for iPhone cases increase?

As we can see from the graph below; when the price of an iPhone decreases, the demand for iPhone cases increases. This is because the demand for iPhones increases as more consumers are buying it at the lower prices. In turn, those same consumers are demanding iPhone cases – which translates into high sales.

Can you use maple syrup on pancakes?

Consumers use maple syrup with pancakes, but they also use other toppings. For instance, consumers may use bananas or sugar instead. Therefore, whilst maple syrup is used to complement pancakes, there are many other alternatives that make the relationship between the two weak. If the price of maple syrup increases by 10 percent, ...