Neutral good

In economics, neutral goods may refer either to goods whose demand is independent of income, or those which have no change on the consumer's utility when consumed. In economics, neutral goods may refer either to goods whose demand is independent of income, or those which have no change on the consumer's utility when consumed. Under the first definition, neutral goods have substitution effects but not income effects. Examples of this include prescription medicines such as insulin for diabetics. Although an individual's income may vary, their consumption of vital medicines will remain constant. The second definition says that a good is neutral if the consumer is ambivalent towards its consumption. That is, the consumption of that good will neither increase nor decrease 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 will not alter his utility. An indifference curve, constructed such that data allowance is measured on Y axis and text allowance is on X axis, will be a vertical line.