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How would one consider the relationship between the two goods, petrol and car? Justify your answer

Question

How would one consider the relationship between the two goods, petrol and car? Justify your answer

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Solution

The relationship between petrol and a car can be considered as a complementary relationship. Here's why:

  1. Definition of Complementary Goods: Complementary goods are those goods that are used together. In other words, the use of one good complements the use of another good.

  2. Application to Petrol and Car: A car cannot run without petrol (assuming it's not an electric car). Therefore, the use of a car is complemented by the use of petrol.

  3. Demand Relationship: The demand for complementary goods is directly related. If the demand for cars increases, the demand for petrol would also increase because more cars would need more petrol to run. Similarly, if the demand for cars decreases, the demand for petrol would also decrease.

  4. Price Relationship: The price of complementary goods is inversely related. If the price of cars increases, the demand for cars would decrease (assuming the price elasticity of demand is elastic). This would lead to a decrease in the demand for petrol. Similarly, if the price of cars decreases, the demand for cars would increase, leading to an increase in the demand for petrol.

In conclusion, the relationship between petrol and a car can be considered as a complementary relationship because they are used together, and their demand and price are interrelated.

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