What are complementary goods?

Complementary goods are defined as products that are used together, meaning that the consumption of one good enhances the consumption of another. For instance, coffee and sugar are complementary goods because many people prefer to use sugar when they drink coffee. If the price of coffee increases and people buy less of it, they will likely also buy less sugar, as their joint consumption is connected.

This relationship demonstrates that a change in the availability or price of one good can directly affect the demand for its complementary good. Understanding complementary goods is crucial for businesses and consumers, as it helps in predicting market behaviors and making informed purchasing decisions.

In contrast, goods that are consumed separately, unrelated to each other, or have no effect on demand do not fit the definition of complementary goods, as they lack the interdependent consumption relationship that is fundamental to the concept.