SUBSTITUTE

GOODS
&
COMPLEMENTARY
GOODS

JHANVI GOEL – 500085122

ANVI JAIN - 500087044

COMPLEMENTARY GOODS
ØComplementary goods are goods or services that are associated with each other
such that when used together they enhance each other usage. Therefore demand
for one leads to the need/demand for other.
Ø These goods rely upon on each another to add value. Some are even good that
are necessary in order for the other to work. For example, petrol is needed
for cars to work. However, there are also weak complementary goods that are not
necessarily needed in order to function. An iPhone does not need a phone case in
order to work, but is still classed as a complementary good.
 EXAMPLES
One of the basic example of complementary goods is mobile and charger. Mobile phone required
charging time to time and without charger it is not possible to charge a phone. On the other hand
without a phone a phone charger is of no use.   

 Other examples include:

1. Tennis Balls and Tennis Racket                      2. Mobile Phones and Sim Cards

3. Petrol and Cars                                                4. Burger and Burger Buns

5. PlayStation and Games                                  6. Movies and Popcorn

7. Shoes and Insoles                                          8. Pencils and Notebooks

 DEMAND AND PRICE 
Complementary goods shows negative cross elasticity indicating that when the price for one
good increases its demand decrease leading to decrease in demand of other good since they
are used together while the price for other good remain same. Similarly if price for one
good decrease the demand for other good would increase with its price being the same. 

   
 COMPLEMENTARY GOODS
GRAPH
The given graph show the demand graph of 

Complementary goods; bread and butter. 

Graph A show the demand graph of bread and

B show demand graph for butter. When the 

Price of bread increase for P1 to P2 quantity demanded 

falls from Q1 to Q2. This increase it price also leads to 

fall in quantity demanded of butter for Q1 to Q2, 

Although the price remains the same P1.  

      SUBSTIbbbbbbbbsbbbbbbbbbbbbbbbbbb SUBSTITUTE  GOODS
 

                                                                                                                                                                                                                                                                                                        

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substitute  GOODS
•Substitute goods are the goods or services which are used for similar or same purposes and
thus can easily replace each other.
•Substitute goods are identical, similar, or comparable to another product, in the eyes of the
consumer. In case of non-availability of goods the consumer can readily shift to the next
best alternative I.e. the substitute good. This is possible since both the goods provide similar
satisfaction to customer want.
•For example if MC Donalds Burger is costly the consumer can shift to Burger King ( it
being closest substitute of Mc donalds ). Burger King’s attractive deals such as the newly
launched Rs 50  stunner menu available in both Vegan & Non-vegetarian will only make
the switching easier..
EXAMPLES
 One of the most common case of substitute goods is Coca- Cola and Pepsi. Both can be replaced
with each other since they falls under a similar price category and has a similar taste profile. 
Other examples -

1. Tea and coffee                                               2. Colgate and close-up

3. Butter & Margarine                                      4. Burger buns and bread

5. Eyeglasses and contact lenses                     6. Cinema halls and online streaming services 

7. Video games and board games                     8. Pencils and pens

 DEMAND AND PRICES 
Substitute goods shows positive cross elasticity of demand indicating that the price for one good
increase results in the increase in demand for other good . When the price of a good increase it
becomes relatively expensive compared to its substitute therefore the demand for its substitute
increases even when its prices remain constant. On the other hand if price decreases so the good
would become comparatively cheaper leading the demand of substitute fall and increase its own
demand. 
 SUBSTITUTE GOODS GRAPH
This graph represents the demand curve for Coca-Cola and Pepsi which are substitute to each
other. When the price for Coca-Cola increased from

P1 to P2, its demands falls from Q1 to Q2. But 

This also resulted in rise in demand of Pepsi 

from D1 to D2 even though its prices does not 

Changed. This shift happens because rise in 

Coke price made Pepsi relatively cheaper and

Consumer started replacing it from Pepsi.