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Good (economics)

Types of goods in economics. In economics, a good is something that is intended to satisfy some wants or needs of a consumer and thus has economic utility. It is normally used in the plural form goods to denote tangible commodities such as products and materials.

Although in economic theory all goods are considered tangible, in reality certain classes of goods, such as information, may only exist in intangible forms. For example, among other goods an apple is a tangible object, while news belongs to an intangible class of goods and can be perceived only by means of an instrument such as print, broadcast, or computer.

Goods are contrasted with services, which are intangible commodities.

Contents

  • Utility characteristics of goods
  • Types of goods
  • Trading of goods
  • See also
  • Notes
  • References

Utility characteristics of goods

Goods may increase or decrease their utility directly or indirectly and may be described as having marginal utility. Some things are useful, but not scarce enough to have monetary value, such as the Earth's atmosphere, these are referred to as 'free goods'.

In economics, a bad is the opposite of a good. Ultimately, whether an object is a good or a bad depends on each individual consumer and therefore, it is important to realize that not all goods are good all the time and not all goods are goods to all people.

Types of goods

Goods' diversity allows of their classification into different categories based on distinctive characteristics, such as tangibility and (ordinal) relative elasticity. A tangible good like an apple differs from an intangible good like information due to the impossibility of a person to physically hold the latter, whereas the former occupies physical space. Intangible goods differ from services in that final (intangible) goods are transferable and can be traded, whereas a service cannot.

price elasticity also differentiates types of goods. An elastic good is one for which there is a relatively large change in quantity due to a relatively small change in price, and therefore is likely part of a family of substitute goods; for example, as pen prices rise, consumers might buy more pencils instead. An inelastic good is one for which there are few or no substitutes, such as tickets to major sporting events, original works by famous artists, and prescription medicine such as Insulin. Complimentary goods are generally more inelastic than goods in a family of substitutes. For example, if a rise in the price of beef results in a decrease in the quantity of beef demanded, it is likely that the quantity of hamburger buns demanded will also drop, despite no change in buns' prices. This is because hamburger buns and beef (in Western culture) are complimentary goods. It is important to note that goods considered compliments and/or substitutes are relative associations and should not be understood in a vacuum. The degree to which a good is a substitute or a compliment depends on its relationship to other goods, rather than an intrinsic characteristic, and can be measured as cross elasticity of demand by employing statistical techniques such as covariance and correlation.

Trading of goods

Goods are capable of being physically delivered to a consumer. Goods that are economic intangibles can only be stored, delivered, and consumed by means of media.

Goods, both tangibles and intangibles, may involve the transfer of product ownership to the consumer. Services do not normally involve transfer of ownership of the service itself, but may involve transfer of ownership of goods developed by a service provider in the course of the service. For example, distributing electricity among consumers is a service provided by an electric utility company. This service can only be experienced through the consumption of electrical energy, which is available in a variety of voltages and, in this case, is the economic goods produced by the electric utility company . While the service (namely, distribution of electrical energy) is a process that remains in its entirety in the ownership of the electric service provider, the goods (namely, electric energy) is the object of ownership transfer. The consumer becomes electric energy owner by purchase and may use it for any lawful purposes just like any other goods.

See also

  • Tangible property
  • Intangibles
  • Fast moving consumer goods
  • Final goods
  • List of economics topics
  • Service (economics)

Notes

References

  • Bannock, Graham et al. (1997). Dictionary of Economics, Penguin Books.
  • Milgate, Murray (1987), "goods and commodities," The New Palgrave: A Dictionary of Economics, v. 2, pp. 546 48. Includes historical and contemporary uses of the terms in economics.

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