ECO-365 Elasticity Paper Essay Example

Satisfactory Essays
Elasticity Paper
ECO/365
August 3, 2014

Product in every market have both substitutes and complements, Substitutes is product that can be used instead of some product, and complements are normally two or more different product but, have to buy together to use the product in complete.
Substitutes can be substitutes because they were originally designed to be as substitutes, or in some cases substitutes can be substitutes because there was already existing goods. Good example for this would be Pepsi, and Coca-Cola, and butter and margarine. If price of Pepsi goes up we can always buy Coca-Cola. Also, if price of butter goes up, we as a consumer can find like need from margarine because it is very similar to butter and come up with similar result to meet our need of butter by using margarine. Substitutes are something that can be replaced by other, or something that can be used instead of original product.
Complement is little different. Complementary is item what are used together. It occur when there is already goods that are complete, but you need other product to use the product in complete. For example CD player itself is a complete product, but to use the CD player in complete you need CD, or it would be pointless purchase due to its characteristic, because CD player is designed to play with the CD not by itself. Another example would be bread and jam, because they are normally bought together, if price for bread go up people will buy jam less than before, because they are normally bought together and used together. But, if price of strawberry jam goes up, demand for blueberry jam would increase because blueberry jam is substitute for strawberry jam.
Relationship between substitutes and complements are very clear. Demand for certain product increase when the complement products price decrease.

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