Related goods are either substitutes or complements. When price of a substitute good rises, the given good becomes relatively cheaper. As a result, its demand rises. Opposite happens when price of the substitute good falls.
When price of a complementary good rises, its demand falls, Since the given good is used jointly with the complementary good, the demand of the given good also falls. This establishes inverse relation between price of a complementary good and demand for the given good.
Demand for the given commodity is also affected by change in price of the related goods.
Related goods are of two types:
(i) Substitute goods: Substitute goods are those goods which can be used in place of one another for satisfaction of a particular want, like tea and coffee. An increase in the price of substitute goods leads to an increase in the demand for given commodity and vice versa. Eg., if price of a substitute good (say coffee) increases, then demand for given commodity (say tea) will rise as tea will become relatively cheaper in comparison to coffee. So demand for a given commodity is directly affected by change in price of substitute goods.
(ii) Complementary goods: Complementary are those goods which are used together to satisfy a particular want, like car and petrol. An increase in the price of complementary goods leads to a decrease in the demand for given commodity and vice versa. For example if price of a complementary good (say petrol) increases, then demand for given commodity (say car) will fall as it will be relatively costlier to use both the goods together.
