Complement

A A A

DEFINITION

A good or service that is used in conjunction with another good or service. Usually, the complementary good has little to no value when consumed alone but, when combined with another good or service, it adds to the overall value of the offering. Also, good tends to have more value when paired with a complement than it does by itself.

INVESTOPEDIA EXPLAINS

A product can be considered a complement when it shares a beneficial relationship with another product offering. In an economic sense, when the price of a good rises, the demand for its complement will fall because consumers don't want to use the complement alone.

For example, if the price of hot dogs rises so much that people stop consuming them, this will also cause a decrease in demand for hot dog buns. Because the price of hot dogs has an inverse relationship to the demand for hot dog buns, we call them complementary products.


RELATED TERMS
  1. Economics

    A social science that studies how individuals, governments, firms and nations ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, ...
  3. Demand

    An economic principle that describes a consumer's desire and willingness to ...
  4. Supply

    A fundamental economic concept that describes the total amount of a specific ...
  5. Substitute

    A product or service that satisfies the need of a consumer that another product ...
  6. Marginal Rate of Technical Substitution

    The rate at which one factor has to be decreased in order to retain the same ...
  7. Absolute Advantage

    The ability of a country, individual, company or region to produce a good or ...
  8. Marginal Propensity To Consume ...

    A component of Keynesian theory, MPC represents the proportion of an aggregate ...
  9. Giffen Good

    A good for which demand increases as the price increases, and falls when the ...
  10. Veblen Good

    Goods that are perceived to be exclusive as long as prices remain high or increase. ...
Related Articles
  1. 10 Breakout Ideas For Small Businesses ...
    Entrepreneurship

    10 Breakout Ideas For Small Businesses ...

  2. Economics Basics
    Economics

    Economics Basics

  3. Economic Indicators To Know
    Retirement

    Economic Indicators To Know

  4. Great Company Or Growing Industry?
    Markets

    Great Company Or Growing Industry?

  5. Financialization
    Markets

    Financialization

  6. Price Elasticity Of Demand
    Economics

    Price Elasticity Of Demand

  7. The Austrian School Of Economics
    Economics

    The Austrian School Of Economics

  8. Introduction To Supply And Demand
    Economics

    Introduction To Supply And Demand

  9. Explaining Comparative Advantage
    Economics

    Explaining Comparative Advantage

  10. Basic Concept Of Absolute Advantage ...
    Economics

    Basic Concept Of Absolute Advantage ...

comments powered by Disqus
Hot Definitions
  1. Quanto Swap

    A swap with varying combinations of interest rate, currency and equity swap features, where payments are based on the movement of two different countries' interest rates. This is also referred to as a differential or "diff" swap.
  2. Genuine Progress Indicator - GPI

    A metric used to measure the economic growth of a country. It is often considered as a replacement to the more well known gross domestic product (GDP) economic indicator. The GPI indicator takes everything the GDP uses into account, but also adds other figures that represent the cost of the negative effects related to economic activity (such as the cost of crime, cost of ozone depletion and cost of resource depletion, among others).
  3. Accelerated Share Repurchase - ASR

    A specific method by which corporations can repurchase outstanding shares of their stock. The accelerated share repurchase (ASR) is usually accomplished by the corporation purchasing shares of its stock from an investment bank. The investment bank borrows the shares from clients or share lenders and sells them to the company.
  4. Microeconomic Pricing Model

    A model of the way prices are set within a market for a given good. According to this model, prices are set based on the balance of supply and demand in the market. In general, profit incentives are said to resemble an "invisible hand" that guides competing participants to an equilibrium price. The demand curve in this model is determined by consumers attempting to maximize their utility, given their budget.
  5. Centralized Market

    A financial market structure that consists of having all orders routed to one central exchange with no other competing market. The quoted prices of the various securities listed on the exchange represent the only price that is available to investors seeking to buy or sell the specific asset.
  6. Balanced Investment Strategy

    A portfolio allocation and management method aimed at balancing risk and return. Such portfolios are generally divided equally between equities and fixed-income securities.
Trading Center