Complement

AAA

DEFINITION of 'Complement'

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 'Complement'

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. Demand

    An economic principle that describes a consumer's desire and ...
  2. Substitute

    A product or service that satisfies the need of a consumer that ...
  3. Economics

    A social science that studies how individuals, governments, firms ...
  4. Elasticity

    A measure of a variable's sensitivity to a change in another ...
  5. Supply

    A fundamental economic concept that describes the total amount ...
  6. Horizontal Merger

    A merger occurring between companies in the same industry. Horizontal ...
RELATED FAQS
  1. What does marginal utility tell us about consumer choice?

    In microeconomics, utility represents a way to relate the amount of goods consumed to the amount of happiness or satisfaction ... Read Full Answer >>
  2. What is the difference between JIT (just in time) and CMI (customer managed inventory)?

    Just-in-time (JIT) inventory management focuses solely on the need to replenish inventory only when it is required, reducing ... Read Full Answer >>
  3. What are some examples of Apple and Google's best-selling product lines?

    There are many good examples of product lines in the technology sector from some of the largest companies in the world, such ... Read Full Answer >>
  4. What is a negative write-off?

    A negative write-off is a write-off conducted by a company or accountant after deciding not to pay back an individual or ... Read Full Answer >>
  5. How can tariffs cause inefficiencies in domestic industries?

    Any government regulation naturally creates inefficiencies in a pure supply and demand marketplace. When it comes to the ... Read Full Answer >>
  6. How does the landscape of the telecommunications sector in the U.S. compare to Canada?

    From a global perspective, there are more similarities than differences between the telecommunications sectors in the United ... Read Full Answer >>
Related Articles
  1. Economics

    Economics Basics

    Learn economics principles such as the relationship of supply and demand, elasticity, utility, and more!
  2. Entrepreneurship

    10 Breakout Ideas For Small Businesses

    If your business has hit a wall, we've got the answer to break through and increase sales and earnings.
  3. Retirement

    Economic Indicators To Know

    The economy has a large impact on the market. Learn how to interpret the most important reports.
  4. Economics

    What Does Inferior Good Mean?

    The term “inferior good” does not describe a lack of quality, but rather, is an economic term used when discussing elasticity of demand for a good.
  5. Economics

    What Is a Giffen Good?

    A Giffen good is a product whose demand increases as its price increases, and falls when its price falls.
  6. Economics

    What Does Going Concern Mean?

    Going concern is a concept used in business and accounting to describe the fiscal health of a company.
  7. Investing Basics

    Explaining Counterparty Risk

    Counterparty risk is the risk that the other party in an agreement will default, or fail to live up to its contractual obligation.
  8. Economics

    Explaining the Supply Chain

    A supply chain is the cumulative network involved in moving raw materials, components and finished products from original suppliers to end users.
  9. Fundamental Analysis

    How is the Demand Schedule Calculated?

    A demand schedule is a table that lists the quantity demanded of a good at different price points.
  10. Economics

    What is Normal Profit?

    Normal profit is an economic term that means zero economic profit.

You May Also Like

Hot Definitions
  1. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  2. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  3. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  4. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  5. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
  6. Touchline

    The highest price that a buyer of a particular security is willing to pay and the lowest price at which a seller is willing ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!