In economics, a complement is a good or service used together with another good or service to satisfy a particular need or desire. Complementary goods are typically consumed or used jointly because they enhance the value or utility of each other when used together. When the price or availability of one of the complementary goods changes, it can impact the demand for the other.

What You Need To Know

There are 2 main types of complements. Direct complements are goods typically consumed or used together in a fixed proportion. The demand for one directly complements the demand for the other. For example, peanut butter and jelly are direct complements because they are often consumed together to make a peanut butter and jelly sandwich. Indirect complements are goods that are not used directly together but are related in a way that affects their demand. For instance, if the price of cars decreases, it might increase the demand for gasoline (an indirect complement) because more people can afford to drive cars and, therefore, need more fuel.

The concept of complements is essential in understanding consumer behavior, pricing strategies, and market dynamics. Changes in the price or availability of a complement can influence the demand for the main product. For businesses, recognizing complements and how they interact with their products can be vital for setting prices, marketing, and overall business strategies.