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Take a standard example: hamburger patties and hamburger buns. It is understandable that if the supply of hamburger patties increases (for whatever reason), the price of these patties will decrease, thus causing an increase in the demand for hamburger buns.

Now, let's say the price of hamburger patties decreases due to a decrease in demand (maybe doctors come out saying beef causes cancer). Why would the demand of hamburger buns increase when the demand of hamburger patties decreased? Standard definition of complementary goods (that I've seen so far) implies that the price decrease of hamburger patties would cause the demand for hamburger buns to increase, but that defies common sense.

Wouldn't a more sensible definition be that goods are complementary when the demand of one good is correlated with the quantity demanded of the other?

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  • $\begingroup$ How would you propose to measure correlation of demand empirically? $\endgroup$ – Henry Sep 20 '16 at 10:33
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Why are complementary goods defined as when a good's demand is inversely correlated with the price of another?

We know that (in this model) the price of patties influences the demand of buns. This is because a cheaper patty makes the whole burger cheaper, which makes me demand more burger and therefore more bun .

Why would the demand of hamburger buns increase when the demand of hamburger patties decreased?

Other things being equal, the price of patties influences the price of buns. The theory says nothing about how the price change came about. You implicitly assume that something changing patty demand would change bun demand, also. In the model world, there are only explicit assumptions.

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