This is a short video briefly explaining the economic concepts of complements and substitutes. It is important to understand the relationship between various goods and services. How will the change in demand for one good affect another good? Will demand go up, go down or remain the same?
Complements or complementary goods are goods that are consumed together. Complements tend to enhance each another. For example, bread and jam are complements. Bread tastes better with jam on it. Jam tastes better on bread than by itself. If the demand for bread increases so will the demand for jam. More bread will require more jam.
Substitutes or substitute goods can be considered as alternatives to each other. If one good becomes unavailable it can be replaced by its substitute. Butter and margarine are examples of substitute goods. Butter and margarine are quite similar in many ways. If one is not available the other can be used. Butter and margarine are rarely used together as they serve the same role. If quantity demanded for butter increases (e.g. costs of producing butter falls, therefore, the price of butter falls, which leads to an increase in quantity demanded of butter), demand for margarine will fall as people switch to the lower priced butter. The price of margarine will also fall because of the lower demand for margarine.
The video explains that the concepts of substitutes and complements do not need to be confined to just goods and services. Some activities can be substitutes for each other. For example, hiking can be a substitute to surfing for some people. Some activities can also be complementary to each other. For example, having a picnic and taking a stroll in the park.
People can also be complements and substitutes to each other. For example an NFL football team has both strong players and fast players. The strong players, e.g. offensive linemen, complement the fast players, e.g. wide receivers, by giving them more time to get open by protecting the quarterback for a longer time. Reserve wide receivers act as substitutes for starting wide receivers when the starting wide receivers are tired or get injured.
It is important to understand that everything is connected. The economic concepts of complements and substitutes can help us understand these relationships. Demand and supply analysis is more reliable when complements and substitutes are considered.
For more information regarding complements and substitutes, you can read my Steemit blog using the following link:
For more information regarding demand, supply and equilibrium, you can read my Steemit blog using the following link:
You can also watch my demand and supply video on Dtube using the following link:
You can also watch my demand and supply videos using the following link to my YouTube playlist:
