Which of the following describes a complementary good?

Study for the SQA National 5 Economics Exam. Engage with flashcards and multiple choice questions, each featuring hints and comprehensive explanations. Prepare confidently for your exam!

A complementary good is defined as a product that is consumed alongside another product, which leads to an increase in the demand for both items. For example, when the price of coffee decreases, more people may buy coffee, which in turn may lead to an increase in demand for cream or sugar, both of which are commonly used with coffee. The key characteristic of complementary goods is that their demand is linked; when one is purchased more frequently, the other typically experiences an increase in demand as well.

In contrast, goods that can replace one another are known as substitute goods, which do not fit the definition of complementary goods. Additionally, a good that is consumed independently does not have a relationship with other goods in terms of demand, and thus does not highlight the interdependence aspect that is crucial for complementary goods. Lastly, the concept of a good decreasing in demand when prices rise aligns with the law of demand and does not describe the relationship between complementary goods. Therefore, the correct identification of complementary goods centers around their interdependency in consumption.

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