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Elasticity Paper

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Elasticity Paper
The laws of supply and demand indicate that as the price of any good or service increases, its demand will decrease. Often, the core demand for a product does not simply go away, but shifts to a substitute. Additionally, as the demand for a product decreases, the quantity of complementary products that are often sold with that product may decrease as well. Therefore, to comprehend the impact of supply and demand on the market, one must also understand the concepts of substitutes and complementary products.
Substitutes
Cross-price elasticity of demand is defined as the percentage alteration in demand divided by the percentage alteration in the price of a related good. (Colander, 2013). When two merchandises are nearly identical, yet competitive, they can become substitutes for one another. For example, the Apple iPad can be comparison to the Samsung Galaxy tablet. The two are very competitive and at the same time, have many similarities. When concerning the economic market, once the price of iPad goes up, the market demand for tablets will shift to the cheaper alternative, which is the Samsung Galaxy tablet. Therefore, when the price of one product rises, the market demand will shift to the cheaper, substitute product. The same concept applies for Coca-Cola products in comparison to Pepsi label. As the price of Coca-Cola rises, the market demand will shift to Pepsi products at the cheaper price. Since they are very similar and competitive of each other; are considered substitutes to one another. (Colander, 2013).
Complements
Complement products are products used in combination with other goods. Usually, the complementary product has little to no value when consumed alone but, when combined with another product, it adds to the overall value. Furthermore, these products tend to have more value when paired with a complement than it does

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