Prices of Related Goods:

Goods relate to each other in two ways. Goods are either compliments or substitutes

(i) Complimentary goods are goods with joint demand. They are needed jointly before a want could be satisfied, e.g., camera and film. With complimentary goods, a steep rise in the price of one will lead not to only to a fall in its consumption but also a decrease in demand for the other good. A fall in the price of one good would lead to an increase in the demand of the other.

(ii) Substitute goods are goods that only one is needed to satisfy a want/need (not both). For substitutes, a fall in the price of one leads to a decrease in demand for the other while an increase in the price of one leads to an increase in the demand for the other, ceteris paribus. For example, margarine and butter could be considered as examples of substitute goods. A sharp increase in the price of margarine will let people consume more butter if the price of butter does not change.