What is the difference between complementary and substitute goods?
Aria Murphy
Published Feb 07, 2026
Substitute Goods refers to the goods which can be used in place of one another to satisfy a particular want. Complementary Goods refers to those goods which are consumed together to satisfy a particular want.
What is complementary goods and supplementary goods?
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. They are supplementary goods.
When do substitute goods become complements of complementary goods?
If the cross elasticity of demand is positive, the products are substitute goods. On the other hand, if cross elasticity is negative, the products are complements. The following chart shows what happens to demand for two substitute goods, iPhone and Galaxy S, when the price of Galaxy S changes.
What is the meaning of substitute goods in economics?
Substitute goods refer to alternative goods to any particular product, that can be used as a replacement for the original product or good. Thus, it implies that their price elasticity is interrelated. Instead of a Coke, you can buy another aerated drink like Pepsi or RC Cola, i.e., they are substitutes for each other.
Which is the best example of a substitute?
Substituting Goods. Substitutes are goods that are used in place of each other. Examples include CDs and digital music files, such as MP3s, or ice cream and frozen yogurt. If a price increase for one good leads to an increase in demand for a related good, then the two goods are considered substitutes.
What is the inverse relationship between substitute goods?
However, consumers will prefer to buy product ‘S’, hence, demand for ‘S’ will increase at the similar price level. This proves that there is an inverse relationship between demand of substitute goods. The psychology of consumers keeps on changing according to fashion trends, technology, brand name, etc.
