Google
Monday 
June 18, 2018 

AmosWEB means Economics with a Touch of Whimsy!

AmosWEBWEB*pediaGLOSS*aramaECON*worldCLASS*portalQUIZ*tasticPED GuideXtra CrediteTutorA*PLS
COMPOUND INTEREST: Interest that's added to a principal at regular intervals such that each subsequent interest calculation is based on the original principal and the added interest. For example, suppose you have a $100 savings account that pays 5 percent interest. Without compound interest, such that your 5 percent interest is paid only at the end of a year, you will have exactly $105 in one year. However, if your interest is compounded each month you end up with $105.12 after a year. The extra 12 cents comes from interest on the interest paid the first month, interest on the interest paid the second month, interest on the interest paid the third month... well I could go on.

Visit the GLOSS*arama


COMPLEMENT-IN-CONSUMPTION:

One of two (or more) goods that provide satisfaction of a want or need when consumed together. A complement-in-consumption is one of two alternatives falling within the other prices determinant of demand. The other is a substitute-in-consumption. An increase in the price of one complement good causes a decrease in demand for the other. A complement-in-consumption has a negative cross elasticity of demand.
Complements-in-consumption are two or more goods that satisfy wants or needs when consumed jointly. Satisfaction is greater when both goods are consumed together than when they are consumed separately. Buying and consuming either good by itself is not quite as satisfying as both goods combined. In many cases, if both complement goods cannot be consumed, then neither will be purchased. Buy both, or buy neither.

The need for food can be satisfied by consuming a hamburger and french fries. The need for transportation can be satisfied by buying a sport utility vehicle and gasoline. The desire to play golf can be satisfied by purchasing golf clubs and golf balls. Satisfaction is less if only one of each pair is consumed.

The price of a complement-in-consumption is part of the other prices demand determinant. A change in the price of a complement-in-consumption causes a change in demand and a shift of the demand curve. An increase in the price of one complement good causes a decrease in demand for the other. A decrease in the price of one complement good causes an increase in demand for the other.

Shifting the Demand Curve

To illustrate this process consider two bits of complementary sporting equipment--golf clubs and golf balls. While can be used in its own right, when consumed together they enable a satisfying round of golf.

Complement-in-Consumption
Golf Balls


How is the demand for golf balls affected if the price of golf clubs should change?

  • A Higher Price: Suppose the price of golf clubs increases. Golf-playing consumers making a recreational decision will undoubtedly react according to the law of demand and decrease the quantity demanded of golf clubs. However, when they purchase fewer golf clubs, then are also inclined to want and need less golf balls. The result is a decrease in the demand for golf balls and a leftward shift of the demand curve. Click the [Price Increase] button to demonstrate.

  • A Lower Price: Suppose the price of golf clubs decreases. Golf-playing consumers will also react according to the law of demand, but in this case they increase the quantity demanded of golf clubs. And as they purchase more golf clubs, then are also inclined to want and need more golf balls. The result is an increase in the demand for golf balls and a rightward shift of the demand curve. Click the [Price Decrease] button to demonstrate.

Cross Elasticity

Classifying a good as a complement-in-consumption is accomplished in a precise manner using the cross elasticity of demand. The cross elasticity of demand is the relative response of the demand for one good to changes in the price of another good. More specifically, it is the percentage change in the demand of one good due to a percentage change in the rice of another good. A complement-in-consumption is then one with a cross elasticity that is negative, or less than zero. In comparison, an substitute-in-consumption has a positive, or greater than zero, cross elasticity.

<= COMPLEMENT GOODCOMPLEMENT-IN-PRODUCTION =>


Recommended Citation:

COMPLEMENT-IN-CONSUMPTION, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2018. [Accessed: June 18, 2018].


Check Out These Related Terms...

     | substitute-in-consumption | complement good | substitute good | complement-in-production | substitute-in-production | other prices, demand determinant | demand determinants |


Or For A Little Background...

     | demand | market demand | demand price | quantity demanded | law of demand | demand curve | change in demand | change in quantity demanded | ceteris paribus |


And For Further Study...

     | market | Marshallian cross | comparative statics | competition | competitive market | consumer surplus | other prices, supply determinant | supply determinants | cross elasticity of demand |


Related Websites (Will Open in New Window)...

     | Antitrust Division, U.S. Department of Justice |


Search Again?

Back to the WEB*pedia


APLS

BLUE PLACIDOLA
[What's This?]

Today, you are likely to spend a great deal of time searching for a specialty store wanting to buy either a birthday gift for your grandfather or a pleather CD case. Be on the lookout for small children selling products door-to-door.
Your Complete Scope

This isn't me! What am I?

The penny is the only coin minted by the U.S. government in which the "face" on the head looks to the right. All others face left.
"We must be willing to let go of the life we have planned, so as to have the life that is waiting for us. "

-- E. M. Forster, writer

ABA
American Bankers Association, Associate in Business Administration
A PEDestrian's Guide
Xtra Credit
Tell us what you think about AmosWEB. Like what you see? Have suggestions for improvements? Let us know. Click the User Feedback link.

User Feedback



| AmosWEB | WEB*pedia | GLOSS*arama | ECON*world | CLASS*portal | QUIZ*tastic | PED Guide | Xtra Credit | eTutor | A*PLS |
| About Us | Terms of Use | Privacy Statement |

Thanks for visiting AmosWEB
Copyright ©2000-2018 AmosWEB*LLC
Send comments or questions to: WebMaster