Some goods are linked. When one of them changes price, demand for the other shifts.
Substitutes: bought instead of each other
- A flight or a train ticket
- The cinema or streaming at home
- A petrol car or an electric bike
Complements: bought together
- A flight and a hotel room
- Streaming and a smart TV
- A car and petrol
The points to remember
- Substitute: a good bought instead of another, because it does a similar job.
- Complement: a good bought together with another, because they are used together.
Remember it as: Substitute = OR. Complement = AND.
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Flights are our good. Watch what happens to their demand when train tickets (a substitute) or hotel rooms (a complement) change price.
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The points to remember
- A substitute gets cheaper: demand for this good shifts left.
- A substitute gets more expensive: demand for this good shifts right.
- A complement gets cheaper: demand for this good shifts right.
- A complement gets more expensive: demand for this good shifts left.
Remember it as: Rival costs more: more for you. Partner costs more: less for you.
See how examiners mark answers
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Standard Level Paper 1 asked this in May 2024, as part (a) for 10 marks; the same question can appear at Higher Level.
Explain how a fall in the price of streaming subscriptions might affect the price and output of their substitutes and of their complements.
Model answer plan
See the answer broken into clear points, with guidance on how each point earns marks.
Animated graph
Watch the graph build step by step in study mode.
What the diagrams must show
- Two diagrams: one for the substitute, one for the complement.
- Each with P and Q axes, S, D1 and D2.
- Substitute: D shifts left, so price and quantity both fall (P1 → P2, Q1 → Q2).
- Complement: D shifts right, so price and quantity both rise.
- In your writing, name each good and say which way its demand shifts.
How the 10 marks are given
| Marks | What your answer needs |
|---|---|
| 9–10 | Both parts fully explained, terms used correctly all the way through, the diagram included and fully explained |
| 7–8 | Both parts explained, terms mostly right, the diagram included and explained |
| 5–6 | Partly explained, some terms, the diagram included |
| 6 at most | Only one of the two parts answered, however good it is |