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Question
With suitable examples differentiate between complementary goods and substitute goods.
Solution
Substitute goods are goods which can be used in place of one another for the satisfaction of a particular want. Demand for a commodity varies directly with the price of a substitute good, say coffee and tea.
Complementary goods are goods which are used together to satisfy a particular want. Demand for a commodity varies inversely with the price of a complementary good, say computer hardware and software.
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