In a market economy, supplies by a producer and demand of the consumer work inversely. As supply goes up, demand goes down and vise versa. Certain goods in a market economy work together. These products are known as complementary goods. An example of this would be printer ink cartridges and printers. As the price of printers goes down, the demand goes up. As this occurs, the demand for ink cartridges would also go up because you need one of the items to use the other. If the price of printers was to go up, the demand would go down, along with the demand for printer ink cartridges. One way that you can determine if two goods are complements is using the cross elasticity of demand equation, as shown below.

Exy= Percentage change in quantity demanded of good x / Percentage change in the price of good y

If the answer for the equation above with two given products is negative, then the products are complements of each other.

Another example of complementary items would be peanut butter and jelly because if you buy more peanut butter, most likely you would buy more jelly because you tend to use them together.

external image pbj.jpg

This video is a commercial for an HP photo printer. The commercial shows many printed pictures printed by the HP Photo Printer, which would be a complementary good for the Camera used.