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Examples of complements

Cups and saucers 

Bread and butter 

Motor cars and the components and raw materials that go into their manufacture 
QUESTION 
Substitutes and complements
 
What might be the effect of an increase in the ownership of domestic deep freezers on the demand for 
perishable food products? 
ANSWER 
(a) 
Domestic deep freezers and perishable products are complements because people buy deep 
freezers to store perishable products. 
(b) 
Perishable products are supplied either as fresh produce (for example, fresh meat and fresh 
vegetables) or as frozen produce, which can be kept for a short time in a refrigerator but for 
longer in a freezer. The demand for frozen produce will rise, while the demand for fresh produce 
will fall. 
(c) 
Wider ownership of deep freezers is likely to increase bulk buying of perishable products. 
Suppliers can save some packaging costs, and can therefore offer lower prices for bulk purchases. 
 
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CHAPTER 4
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MICROECONOMIC FACTORS 
 
95 
4.5 The price elasticity of demand 
Elasticity, in general, refers to the relationship between two variables. Price elasticity of demand explains 
the relationship between 
change in quantity demanded 
and 
changes in price
.
If prices went 
up
by 10%, would the quantity demanded 
fall
by the same percentage? 
Price elasticity of demand 
(PED) is a measure of the extent of change in the market demand for a 
good in response to a change in its price. The demand for a good is said to be 
inelastic
when changes in 
price have a relatively 
small
effect on the quantity of the good demanded. The demand for a good is said 
to be 
elastic
when changes in price have a relatively 
large
effect on the quantity of a good demanded. 
‘Relatively small’ and ‘relatively large’ here equate to ‘less than 1’ and ‘greater than 1’ respectively. 
The coefficient of PED is measured as: 
Percentage change in quantity demanded
Percentage change in price
Since demand usually increases when the price falls, and decreases when the price rises, elasticity has 
a negative value.