# Neutral good

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{{About|an economic term|the Dungeons & Dragons term|Alignment (Dungeons & Dragons)#Neutral good}}
In [economics](/source/economics), '''neutral goods''' refers either to [goods](/source/good_(economics)) whose [demand](/source/demand) is independent of [income](/source/income),<ref name=":0">{{Cite book|title=Economics|last=Arnold|first=Roger A.|date=2008|publisher=Thomson South-Western|isbn=9780324538014|edition=Eighth|location=Mason, OH, USA|pages=58|oclc=131000286}}</ref> or those that have no change on the consumer's [utility](/source/utility) when consumed.<ref name=":1">{{Cite book|title=Intermediate microeconomics : a modern approach|last=Varian|first=Hal R.|publisher=W. W. Norton|year=2014|isbn=9780393919677|edition=Ninth|location=New York|pages=41|oclc=879663971}}</ref> 

Under the first definition, neutral goods have [substitution effect](/source/substitution_effect)s but not [income effect](/source/income_effect)s. Examples of this include prescription medicines such as [insulin](/source/insulin) for [diabetic](/source/diabetic)s. An individual's income may vary, but their consumption of vital medicines remains constant.<ref name=":0" />

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](/source/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](/source/indifference_curve)—constructed with data allowance on the Y axis and text allowance is on the X axis forms a vertical line.<ref name=":1" />

==Income elasticity and classification==
Neutral goods are sometimes classified using their [income elasticity of demand](/source/income_elasticity_of_demand).  
Goods with an income elasticity close to zero are considered neutral because changes in consumer income do not meaningfully affect their quantity demanded.<ref>{{cite web |title=4.05: The income elasticity of demand |url=https://socialsci.libretexts.org/Bookshelves/Economics/Microeconomics/Principles_of_Microeconomics_(Curtis_and_Irvine)/02%3A_Responsiveness_and_the_Value_of_Markets/04%3A_Measures_of_response-_Elasticities/4.05%3A_The_income_elasticity_of_demand |website=LibreTexts Social Sciences |publisher=LibreTexts |date=2022 |access-date=3 October 2025}}</ref>  
Because demand remains relatively unchanged as income rises or falls, neutral goods are distinct from [normal good](/source/normal_good)s—whose demand increases with income—and [inferior good](/source/inferior_good)s—whose demand decreases as income increases.<ref>{{cite web |title=Income elasticity of demand |url=https://www.opentextbooks.org.hk/ditatopic/38813 |website=Open Textbooks for Hong Kong |publisher=Vocational Training Council |access-date=3 October 2025}}</ref>

==References==
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{{Goodtypes}}

{{DEFAULTSORT:Neutral Good}}
Category:Goods

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