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, a supplementary good would be an Amazon widget which allows you access to a much greater range of tv programmes.
Examples of supplementary good
- Android phone and Android App. Here the app is a supplement to your phone.
- Car and superlight tyres. The superlight tyres go with the car – they make the experience better, but are not necessary to complement the car, you can survive without the extra light tyres.
Definition of the word supplementary
The definition of supplementary is something that is added on, or that completes something. (dictionary)
Supplementary goods have a negative cross elasticity of demand. E.g. price of petrol goes up, demand for petrol and cars goes down.
An Android App is no good without an Android Phone. They are supplementary goods.
A very similar term is ‘complementary good‘ A complementary good is the same principle of two goods being used together. The difference is that complementary goods often need each other to function. If you have a printer, the complement is the printer ink. If you just had printer ink, it would be not much use without the printer.
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.