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(Redirected from Independent good) Goods that are neither complements nor substitutes

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Independent goods are goods that have a zero cross elasticity of demand. Changes in the price of one good will have no effect on the demand for an independent good. Thus independent goods are neither complements nor substitutes.

For example, a person's demand for nails is usually independent of his or her demand for bread, since they are two unrelated types of goods. Note that this concept is subjective and depends on the consumer's personal utility function.

A Cobb-Douglas utility function implies that goods are independent. For goods in quantities X₁ and X₂, prices p₁ and p₂, income m, and utility function parameter a, the utility function

u(X_{1},X_{2})=X_{1}^{a}X_{2}^{(1-a)},

when optimized subject to the budget constraint that expenditure on the two goods cannot exceed income, gives rise to this demand function for good 1: $X_{1}=am/p_{1},$ which does not depend on p₂.

References

R Varian, Hal (2006). Intermediate Microeconomics : A modern approach 7th Edition. W.W. Norton & Co. p. 754. ISBN 0-393-92702-4.

v t e Types of goods
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 Global public goods Inferior goods Information goods Intangible goods Intermediate goods Luxury goods Merit goods and demerit goods Neutral goods Normal goods Necessity goods Ordinary goods Private goods Household goods Public goods (Non-)rivalrous goods and (Non-)excludable goods Search goods Superior goods Used goods Veblen goods

Types of goods

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