What is true about Complements?

Complements are goods that are typically consumed together, meaning that an increase in the price of one good can affect the demand for its complement. When the price of a complement rises, consumers tend to purchase less of that complement. As a result, the demand for the other good that pairs with it decreases as well. This interplay arises because the increased cost of one item discourages consumption of both, as consumers view them as related in their utility.

For example, if the price of coffee rises, the demand for sugar may drop because consumers might buy less coffee, and consequently, they will also purchase less sugar, which is often used with coffee. Understanding this relationship is crucial in economic analysis, as it highlights how closely linked products can impact consumer behavior and market demand.