Independent goods

Two goods that are independent have a zero cross price elasticity of demand : as the price of good Y rises, the demand for good X stays constant

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:^[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.

Types of goods

Public goods Private goods (includes household goods) Common goods Common-pool resource Club goods Anti-rival goods Global public goods Global commons

(Non-)Rivalrous goods and (Non-)Excludable goods

Complementary goods vs. Substitute goods vs. Independent goods

Free goods vs. Positional goods

(Non-)Durable goods Intermediate goods (producer goods) Final goods Capital goods

Inferior goods Normal goods (Necessity goods) Neutral goods Ordinary goods Giffen goods Luxury goods Veblen goods Superior goods

Search goods (Post-)Experience goods Credence goods

Merit goods Demerit goods

Damaged goods Composite goods Intangible goods

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Independent goods

See also

References