A complementary good is a good that is used in conjunction with another good. For example, bread and butter are complementary goods because you need both bread and butter to make a sandwich. In economics, complementary goods are often referred to as “demand-side complements.” This is because the demand for one good increases when the price of the other good decreases.
Complementary goods are important to consider when analyzing economic data. This is because changes in the prices of complementary goods can have a significant impact on consumer behavior. For example, if the price of bread decreases, people may be more likely to buy bread and butter, since they are now able to get more sandwiches for their money. On the other hand, if the price of bread increases, people may be less likely to buy bread and butter, since they can now get more sandwiches for their money.
It is also important to consider complementary goods when making policy decisions. For example, if the government imposes a tax on bread, this may lead to an increase in the price of bread and butter, which could have a negative impact on consumers. Therefore, it is important to consider the potential impacts of policy changes on both the demand and supply of complementary goods before implementing them.