Independent goods are

goods In economics, goods are anything that is good, usually in the sense that it provides welfare or utility to someone. Alan V. Deardorff, 2006. ''Terms Of Trade: Glossary of International Economics'', World Scientific. Online version: Deardorffs ...

that have a zero

cross elasticity of demand In economics, the cross (or cross-price) elasticity of demand (XED) measures the effect of changes in the price of one good on the quantity demanded of another good. This reflects the fact that the quantity demanded of good is dependent on not on ...

. Changes in the price of one good will have no effect on the

demand In economics, demand is the quantity of a goods, good that consumers are willing and able to purchase at various prices during a given time. In economics "demand" for a commodity is not the same thing as "desire" for it. It refers to both the desi ...

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 In economics, utility is a measure of a certain person's satisfaction from a certain state of the world. Over time, the term has been used with at least two meanings. * In a Normative economics, normative context, utility refers to a goal or ob ...

. A Cobb-Douglas utility function implies that goods are independent. For goods in quantities ''X''₁ and ''X''₂, prices ''p''₁ and ''p''₂, income ''m'', and utility function parameter ''a'', the utility function :

u(X_1, X_2) = X_1^a X_2^,

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 ''p''₂.

References

Goods (economics) Utility function types {{trade-stub

See also

References