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What are Substitute and Complementary Goods?



Stephen L. Thomas
By Stephen L. Thomas | January 12, 2024 | In

One of the factors that can determine a business’ success is how well they navigate competition. A way to be proactive and stay competitive is by planning ahead for customer’s needs. This often means anticipating products or services they may need and offering them alongside existing products. A way to do this is by the provision of complementary goods. What Are Complementary Goods? Complementary goods are ones where their demand is directly correlated with another good’s demand. Another way to look at it is that complementary goods are paired or sometimes rely on one another to meet customer needs. An example of a complementary good is the filter for a water filtration system. Since the dispenser system won’t work without the filter and it needs to be replaced periodically, customers are usually willing to pay for the filters. In this case, the use of a dispenser filter system drives the demand for filters. Another example would be mobile phones and a phone cases. It’s also essential to know that not all complementary goods rely on each other; some just complement one another. For instance, if

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