Monday, July 29, 2013

What are complements in regard to various products?my case study used the examples of Mobil and TOTAL gas companies and gave a sill example of...

Complementary products are products that tend to be used
with one another.  This means that the price of one of these can affect the demand for
the other.  If the price of one complement goes down, people buy more of it.  When this
happens, they need to buy more of the other complement.


If
we are talking about Mobil Oil, we might say that complements would be various chemicals
that they need for refining their crude oil.  In this case, if the price of chemical A
goes down, Mobil would be able to buy more of it (all other things being equal).  If
that happened, they would need to buy more of chemical B (used in the same process as
chemical A).


Or perhaps let us say that the price of
producing motor oil goes down.  A complement to motor oil (from the point of view of
Mobil) is the plastic bottles that the motor oil is packaged in.  If the price of
producing motor oil goes down, the demand for the plastic bottles would go up -- more
oil produced means more need for bottles to put it in.

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