Change in the price of a related good, Microeconomics

Change in the price of a related good:

Goods relate to each other in two ways. Goods are either complements or substitutes.

Complementary goods are goods with joint demand. They are needed jointly before a want could be satisfied, e.g., camera and film. With complementary goods, a steep rise in the price of one will lead not only to a fall in its consumption but a fall in the consumption of the other good too. A fall in the price of one good would lead to an increase in the demand of the other. Substitute goods on the other hand, are goods that only one is needed to satisfy a want/need (not both). For substitutes, a fall in the price of one leads to a decrease in demand for the other and an increase in the price of one leads to an increase in the demand for the other, ceteris paribus.

Posted Date: 1/2/2013 1:16:03 AM | Location : United States







Related Discussions:- Change in the price of a related good, Assignment Help, Ask Question on Change in the price of a related good, Get Answer, Expert's Help, Change in the price of a related good Discussions

Write discussion on Change in the price of a related good
Your posts are moderated
Related Questions
A Period of Transition and Improvement: These few years stand out as the golden years for India's BOP. India had a small current account surplus (0.6 per cent of the GDP on an


Is Indian companies running a risk by not giving attention to cost cutting

What are externalities? Give an example of positive and negative externality and explain why the market outcomes are inefficient in the presence of externalities

Factors of Production :   The factors of production are the resources that are essential for production. They are usually separated into 4 dissimilar groups: Land - all natu



explain about integrability problem

Yuen, a travelling salesman for snake oil, can produce the stuff at a marginal cost of 1. There are 100 potential customers in Vernon, each of whom has the following demand functio

Concept of Stock Replenishment  This concept assumes that stock is always available whether there is demand or not. Consider the demand for constituent items, such as componen