Listen to part of a lecture in an economics class.
(female professor) So, when we talked about the demand for a product, we're referring to how much consumers want to buy it, right? And often the demand for a product is influenced by its price, the more expensive it becomes the less chance people want to buy it.OK, but that's not the whole story. Sometimes the demand for a product can also be influenced by the price of other related products.First, there are other products called “substitute goods”. If products can be substituted for one another then, um, well, then they are called substitute goods. They are similar enough to be interchangeable. And, uh, the increase of price of one means the increase for the demand of the other. Like, uh, like butter and margarine. They are pretty much used for the same purposes. Margarine's butter's substitute and you can bake equally well with either. Well, when the price of butter goes up, it becomes less affordable, and so what do people do? They buy margarine instead, right? So, uh, you see, increase of the price of butter increases the demand for margarine. Now, another instance with the price of one product can influence the demand of another is, uh, is when you have two products that can’t be used without each other. Those products we call “complement goods”. They complement, or complete, each other, if you will. Like compact disks and compact disk players. You need both products in order to use either. So if the price of either product increases demand for both is likely to decrease. And if the price of the CD’s goes up, well, demand for them will do down, right? And because CD’s and CD player complement each other, what will also happen is that the demand for CD player will go down, too."
Using the points and examples from the talk, explain how substitute goods and complement goods influence demand for a particular product.
Sometimes the demand of a product can be influenced by the price of related product, and there're two types of those interrelated products. The first is called substitute goods, which means the two products can replace each other. So when the price of one goes up, the demand for the other goes up,too. Take butter and margarine. If the price of butter increases, and is therefore increasingly unaffordable for people, people will begin to buy more margarine, which means the demand for margarine goes up. Another is complement products. That is, either one of the two products can not be used until with the other. For example, compact disc and disc player are complement product, and you cannot use compact disc without a player. The demand for both will decrease if either of them becomes more expensive. For instance, if the price of CD increases, the demand of CD player will go down. (152 words)
