Neutral good
In economics, neutral goods refers either to goods whose demand is independent of income,[1] or those that have no change on the consumer's utility when consumed.[2]
Under the first definition, neutral goods have substitution effects but not income effects. Examples of this include prescription medicines such as insulin for diabetics. An individual's income may vary, but their consumption of vital medicines remains constant.[1]
The second definition says that a good is neutral if the consumer is ambivalent towards its consumption. That is, the consumption of that good neither increases nor decreases the consumer's utility. For example, if a consumer likes texting, but is neutral about the data package on his phone contract, then increasing the data allowance does not alter his utility. An indifference curve—constructed with data allowance on the Y axis and text allowance is on the X axis forms a vertical line.[2]
References
- ^ a b Arnold, Roger A. (2008). Economics (Eighth ed.). Mason, OH, USA: Thomson South-Western. p. 58. ISBN 9780324538014. OCLC 131000286.
- ^ a b Varian, Hal R. (2014). Intermediate microeconomics : a modern approach (Ninth ed.). New York: W. W. Norton. p. 41. ISBN 9780393919677. OCLC 879663971.
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- Anti-rival goods
- Capital goods
- Club goods
- Common goods
- Common-pool resource
- Complementary goods vs. Substitute goods vs. Independent goods
- Composite goods
- Credence goods
- (Non-)durable goods
- (Post-)experience goods
- Final goods
- Free goods vs. Positional goods
- Giffen goods
- Global commons
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- Information goods
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- Intermediate goods
- Luxury goods
- Merit goods and demerit goods
- Neutral goods
- Normal goods
- Ordinary goods
- Private goods
- Public goods
- (Non-)rivalrous goods and (Non-)excludable goods
- Search goods
- Superior goods
- Used goods
- Veblen goods
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