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Pricing the base good at a relatively low price - this approach allows easy entry by consumers (e.g. low-price consumer printer vs. high-price cartridge) Pricing the base good at a relatively high price to the complementary good - this approach creates a barrier to entry and exit (e.g., a costly car vs inexpensive gas)
Only if the two products satisfy the three conditions, will they be classified as close substitutes according to economic theory. The opposite of a substitute good is a complementary good, these are goods that are dependent on another. An example of complementary goods are cereal and milk. An example of substitute goods are tea and coffee.
Cross elasticity of demand of product B with respect to product A (η BA): = / / = > implies two goods are substitutes.Consumers purchase more B when the price of A increases. Example: the cross elasticity of demand of butter with respect to margarine is 0.81, so 1% increase in the price of margarine will increase the demand for butter by 0.81
A common type of product used in cross merchandising is complementary goods, which are products that are consumed in conjunction with one another. Electronics and batteries as well as printers and ink cartridges are examples of products that exhibit complementary properties for customers to connect. [7]
Aftermarket in economic literature refers to a secondary market for the goods and services that are complementary or related to the primary market goods, also known as original equipment). [1] [2] [3] In many industries, the primary market consists of durable goods, whereas the aftermarket consists of consumable or non-durable products or ...
A complementary monopoly is an economic concept. It considers a situation where consent must be obtained from more than one agent to obtain a good. In turn leading to a reduction in surplus generated relative to an outright monopoly, if the two agents do not cooperate.
An inelastic good is one for which there are few or no substitutes, such as tickets to major sporting events, [1] original works by famous artists, [2] and prescription medicine such as insulin. Complementary goods are generally more inelastic than goods in a family of substitutes. For example, if a rise in the price of beef results in a ...
In an unregulated market, prices of credence goods tend to converge, i.e. the same flat rate is charged for high and low value goods. The reason is that suppliers of credence goods tend to overcharge for low value goods, since the customers are not aware of the low value, while competitive pressures force down the price of high value goods. [6]