Definition:A complementary good is a good with a negative elasticity of demand. This means that a good's demand is increased when the price of another good is decreased. Substitute goods are two goods that could be used for the same purpose. If the price of one good increases, the demand for the substitute is likely to increase as well. substitutes have a positive cross elasticity of demand. Importance in Econnomics: Goods are very important in economics. A main reason is because prices are often the greatest factor that leads a consumer to make the choice of a substitute good over a preferred good. This requires consumers to spend more wisely on their goods and services to have a good economic life. Many people are driven by outside influences that individuals cannot control.
For example, money supply or inflation can change a consumer’s spending pattern. Scarce economic goods are other goods that may be out of a consumer’s control. A scarce good is an item that has low supply with a relatively high demand. When preferred products are unavailable, consumers will search for a replacement good instead. These are only a few ways how goods impact a person'f life which is very important to economics. | ExamplesWhen you go to Best Buy to get a new computer you end up buying some software to go with it. You might need Microsoft Office or a specialized accounting software for your business. The new computer alone won't get the job done; you need the complementary software also. |