Supplementary Goods

Definition – Supplementary goods are two goods that are used together. For example, if you have a car, you also need petrol to run the car.

If you have a tv, you also need the supplementary good of electricity.

A more common term is ‘complementary good‘ A complementary good is the same principle of two goods being used together.

Supplementary goods have a negative cross elasticity of demand. E.g. price of petrol goes up, demand for petrol and cars goes down.

supplementary

An Android App is no good without an Android Phone. They are supplementary goods.

Not to be Confused with Substitute Goods.

Substitutes are two goods which could be alternatives.

For example, if you buy a gas cooker, the substitute is an electric cooker. If you buy Buxton mineral water, the substitute is Highland Spring mineral water.

Substitute goods have a positive cross elasticity of demand. A Higher price of Buxton water leads to higher demand for Highland spring.

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