Question

Distinguish between substitution goods and complementary goods with examples.

Answer 1

Substitution goods	Complementary goods
Substitute goods are those goods which satisfy the same type of need and hence can be used in place of one another to satisfy a given want.	Complementary goods are those goods which are complementary to one another in the sense that they are used jointly or consumed together to satisfy a given want.
Tea and coffee, coke and pepsi are examples of substitute goods.	Car and petrol, gas and gas stoves are examples of substitute goods.
There is a direct relationship between the demand for a product and the price of its substitute.	There is an inverse relationship between the demand for a good and the price of its complement.