We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Economy

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What Is a Neutral Good?

Mary McMahon
By
Updated: May 16, 2024
Views: 15,615
Share

A neutral good is product or service that remains a consistent necessity no matter how much consumers make. Toilet paper is an example. Consumers will need toilet paper whether they are unemployed or living on a trust fund. While they may vary the quality in response to economic pressures, they will still need to buy some form of this neutral good to meet their needs.

The market for neutral goods can remain very stable, as companies always have a built-in consumer base. Other examples include prescription medications for people with chronic illnesses, and staple foods. Choice does not play a major role in neutral good purchases, unlike luxuries that consumers can choose to do without when they do not have very much money. Consumers need these things even when they do not have ample funds available, and thus manufacturers of such goods can rely on steady sales numbers.

Tracking neutral good sales can provide important information about economic health and activities within the economy. Analysts can look at the kinds of price points consumers tend to hit. When consumers cluster around low price points for neutral goods, this can be an indicator of decreased purchasing power, as they are making the decision to pay less in order to conserve money. More sales at higher price points indicates a willingness to pay a premium, often linked with making more money and feeling comfortable with the added expense.

Government benefits programs need to consider neutral good pricing when determining how much to award in benefits. If recipients do not get enough money to cover the neutral goods they need to survive, this can create a potentially dangerous situation. The consumer may do things like skipping doses of medication or undereating to pay for necessities. At the same time, benefits programs do not want to pay for premium goods that recipients may prefer to low cost items.

Organizations with an interest in low income populations may conduct studies on the pricing of neutral goods. This information can be important for studies on upward mobility, costs of living, and challenges faced by low income populations. In regions where the pricing on neutral goods is very high, it can be difficult to meet basic needs, and consumers may be at a disadvantage. Low pricing may make it easier to save money, invest in activities like buying homes and businesses, and can contribute to a sense of economic safety and stability.

Share
SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a SmartCapitalMind researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Discussion Comments
Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

Learn more
Share
https://www.smartcapitalmind.com/what-is-a-neutral-good.htm
Copy this link
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.