Value & Capital, CHAPTER V, Section 7

This section adds one final proposition to the discussion of the laws of exchange.  Hicks had previously shown that when demand for some good X rises, the price of X must rise.  In this section he addresses the question of what governs the extent of the rise in price.  His answer (again ignoring income effects) is the following:

It can be shown that a given rise in demand will affect the price of X less, the more substitutability or the less complementarity there is between any pair of commodities in the system.

It makes intuitive sense that if there are a large number of substitutes for X, then the increased demand for X will cause some consumers to shift to a substitute rather than pay the higher price for X.  Hicks's explanation is similar, but he adds that the substitutes themselves will also tend to rise in price, although the rise will be spread broadly over the whole set of substitutes and will therefore affect each one very little.

When there is less complementarity in the system, one could think of this as a situation in which it is relatively painless to shift demand from one good to another;  making do with less of a commodity does not tend to diminish the utility gained from consuming other commodities.  Hicks comes at the question from the other direction, assuming a large group of complements; then, an increase in the demand for X will lead suppliers of the increased volume of X to tend to dispose of goods complementary with X.  If the demand for these complementary goods had not increased, this would tend to drive down their prices, which would then lead to increased demand.  Since X is complementary with them, demand for X would increase as well, thus further increasing its price.

Hicks notes that we can apply these same concepts "at a second remove" to the substitutes and complements themselves.  If such a good (either a substitute or complement for X) has good substitutes, the effect on its price from the change in demand for X will be less pronounced.  If on the other hand it is a member of a set of complements, the effect on its price will be increased.

Hicks concludes the section by noting that

Complementarity, like imperfect substitutability, is therefore to be regarded as an element of rigidity in the system, which diminishes the elasticity of supply of any particular good.  Similarly, of course, if we had begun with an increase in supply of X, we should have found the same factors diminishing the elasticity of demand.