Goods

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Tangible goods stacked in a warehouse Mediq Sverige Kungsbacka warehouse.jpg
Tangible goods stacked in a warehouse

In economics, goods are items that satisfy human wants [1] [ dead link ] and provide utility, for example, to a consumer making a purchase of a satisfying product. A common distinction is made between goods which are transferable, and services, which are not transferable. [2]

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A good may be a consumable item that is useful to people but scarce in relation to its demand, so that human effort is required to obtain it. In contrast, free goods, such as air, are naturally in abundant supply and need no conscious effort to obtain them. Private goods are things owned by people, such as televisions, living room furniture, wallets, cellular telephones, almost anything owned or used on a daily basis that is not food related.

A consumer good or "final good" is any item that is ultimately consumed, rather than used in the production of another good. For example, a microwave oven or a bicycle that is sold to a consumer is a final good or consumer good, but the components that are sold to be used in those goods are intermediate goods. For example, textiles or transistors can be used to make some further goods.

Commercial goods are construed as tangible products that are manufactured and then made available for supply to be used in an industry of commerce. Commercial goods could be tractors, commercial vehicles, mobile structures, airplanes and even roofing materials. Commercial and personal goods as categories are very broad and cover almost everything a person sees from the time they wake up in their home, on their commute to work to their arrival at the workplace.

Commodities may be used as a synonym for economic goods but often refer to marketable raw materials and primary products. [3]

Although common goods are tangible, certain classes of goods, such as information, only take 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 or television.

Utility and 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 normal parlance, "goods" is always a plural word, [4] [5] but economists have long termed a single item of goods "a good".

In economics, a bad is the opposite of a good. [6] Ultimately, whether an object is a good or a bad depends on each individual consumer and therefore, not all goods are goods to all people.

Types of goods

Types of goods in economics. Types of goods.svg
Types of goods in economics.

Goods' diversity allows for 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 to be 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,[ citation needed ] original works by famous artists,[ citation needed ] and prescription medicine such as insulin. Complementary 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 complementary goods. It is important to note that goods considered complements or substitutes are relative associations and should not be understood in a vacuum. The degree to which a good is a substitute or a complement 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.

The following chart illustrates the classification of goods according to their exclusivity and competitiveness.

Excludable Non-excludable
Rivalrous Private goods
food, clothing, cars, parking spaces
Common-pool resources
fish stocks, timber, coal
Non-rivalrous Club goods
cinemas, private parks, satellite television
Public goods
free-to-air television, air, national defense

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 or marketed by a service provider in the course of the service. For example, sale of storage related goods, which could consist of storage sheds, storage containers, storage buildings as tangibles or storage supplies such as boxes, bubble wrap, tape, bags and the like which are consumables, or 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

Notes

  1. Quotation from Murray Milgate, [1987] 2008, "goods and commodities, " The New Palgrave Dictionary of Economics , 2nd ed., preview link Archived 2013-05-27 at the Wayback Machine , in referencing an influential parallel definition of 'goods' by Alfred Marshall, 1891. Principles of Economics , 2nd ed., Macmillan.
  2. Alan V. Deardorff, 2006. Terms Of Trade: Glossary of International Economics, World Scientific. Online version: Deardorffs' Glossary of International Economics, "good" Archived 2013-03-18 at the Wayback Machine and "service". Archived 2017-07-01 at the Wayback Machine
  3. Alan V. Deardorff, 2006, Deardorffs' Glossary of International Economics "commodity". Archived 2007-12-12 at the Wayback Machine
  4. Oxford English Dictionary
  5. eg: Carriage of Goods by Sea Act, goods vehicle, Sale of Goods Act
  6. Dwivedi, D. N. (2016). Microeconomics: Theory and Applications. Vikas Publishing House PVT LTD. p. 133. ISBN   978-93259-8670-1.

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Microeconomics is a branch of economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms.

Indifference curve microeconomic graph; connects points representing different quantities of 2 goods, points between which a consumer is indifferent: i.e. the consumer doesnt prefer one combination or bundle of goods over another combination on the same curve

In economics, an indifference curve connects points on a graph representing different quantities of two goods, points between which a consumer is indifferent. That is, any combinations of two products indicated by the curve will provide the consumer with equal levels of utility, and the consumer has no preference for one combination or bundle of goods over a different combination on the same curve. One can also refer to each point on the indifference curve as rendering the same level of utility (satisfaction) for the consumer. In other words, an indifference curve is the locus of various points showing different combinations of two goods providing equal utility to the consumer. Utility is then a device to represent preferences rather than something from which preferences come. The main use of indifference curves is in the representation of potentially observable demand patterns for individual consumers over commodity bundles.

This aims to be a complete article list of economics topics:

Capital (economics) Already-produced durable goods that are used in production of goods or services

In economics, capital consists of assets that can enhance one's power to perform economically useful work. For example, a stone or an arrow is capital for a hunter-gatherer who can use it as a hunting instrument; similarly, roads are capital for inhabitants of a city. Capital is distinct from land and other non-renewable resources in that it can be increased by human labor, and does not include certain durable goods like homes and personal automobiles that are not used in the production of saleable goods and services. Adam Smith defined capital as "that part of man's stock which he expects to afford him revenue". In economic models, capital is an input in the production function.

Service (economics) Transaction involving no transferal of physical goods

In economics, a service is a transaction in which no physical goods are transferred from the seller to the buyer. The benefits of such a service are held to be demonstrated by the buyer's willingness to make the exchange. Public services are those that society as a whole pays for. Using resources, skill, ingenuity, and experience, service providers benefit service consumers. Service is intangible in nature.

Price elasticity of demand (Epd), or elasticity, is the degree to which the effective desire for something changes as its price changes. In general, people desire things less as those things become more expensive. However, for some products, the customer's desire could drop sharply even with a little price increase, and for other products, it could stay almost the same even with a big price increase. Economists use the term elasticity to denote this sensitivity to price increases. More precisely, price elasticity gives the percentage change in quantity demanded when there is a one percent increase in price, holding everything else constant.

In economics, the cross elasticity of demand or cross-price elasticity of demand measures the responsiveness of the quantity demanded for a good to a change in the price of another good, ceteris paribus. It is measured as the percentage change in quantity demanded for the first good that occurs in response to a percentage change in price of the second good. For example, if, in response to a 10% increase in the price of fuel, the demand for new cars that are fuel inefficient decreased by 20%, the cross elasticity of demand would be: . An increase in the price of fuel will decrease demand for cars that are not fuel efficient.

The theory of consumer choice is the branch of microeconomics that relates preferences to consumption expenditures and to consumer demand curves. It analyzes how consumers maximize the desirability of their consumption as measured by their preferences subject to limitations on their expenditures, by maximizing utility subject to a consumer budget constraint.

Giffen good product that people consume more of as the price rises

In economics and consumer theory, a Giffen good is a product that people consume more of as the price rises and vice versa—violating the basic law of demand in micro economics. For any other sort of good, as the price of the good rises, the substitution effect makes consumers purchase less of it, and more of substitute goods; for most goods, the income effect reinforces this decline in demand for the good. But a Giffen good is so strongly an inferior good in the minds of consumers that this contrary income effect more than offsets the substitution effect, and the net effect of the good's price rise is to increase demand for it. Also known as Giffen Paradox. A Giffen good is considered to be the opposite of an ordinary good.

Substitute good The economic concept of a product that can replace another product

In microeconomics, a substitute good is a good that can be used in place of another. In consumer theory, substitute goods or substitutes are goods that a consumer perceives as similar or comparable, so that having more of one good causes the consumer to desire less of the other good. Formally, good is a substitute for good if, when the price of rises, the demand for rises. Let be the price of good . Then, is a substitute for if

Complementary good Economic concept of a good whose demand is directly tied to another goods demand

In economics, a complementary good is a good whose appeal increases with the popularity of its complement. Technically, it displays a negative cross elasticity of demand and that demand for it increases when the price of another good decreases. If A is a complement to B, an increase in the price of A will result in a negative movement along the demand curve of A and cause the demand curve for B to shift inward; less of each good will be demanded. Conversely, a decrease in the price of A will result in a positive movement along the demand curve of A and cause the demand curve of B to shift outward; more of each good will be demanded. This is in contrast to a substitute good, whose demand decreases when its substitute's price decreases.

Use value or value in use is a concept in classical political economy and Marxian economics. It refers to the tangible features of a commodity which can satisfy some human requirement, want or need, or which serves a useful purpose. In Karl Marx's critique of political economy, any product has a labor-value and a use-value, and if it is traded as a commodity in markets, it additionally has an exchange value, most often expressed as a money-price.

A theory of value is any economic theory that attempts to explain the exchange value or price of goods and services. Key questions in economic theory include why goods and services are priced as they are, how the value of goods and services comes about, and—for normative value theories—how to calculate the correct price of goods and services.

Demand curve Graph depicting the relationship between the price of a certain commodity and the amount of it that consumers are willing and able to purchase at that given price

In economics, a demand curve is a graph depicting the relationship between the price of a certain commodity and the quantity of that commodity that is demanded at that price. Demand curves may be used to model the price-quantity relationship for an individual consumer, or more commonly for all consumers in a particular market. It is generally assumed that demand curves are downward-sloping, as shown in the adjacent image. This is because of the law of demand: for most goods, the quantity demanded will decrease in response to an increase in price, and will increase in response to a decrease in price.

Goods and services Outcome of human efforts to meet the wants and needs of people

Goods are items that are usually tangible, such as pens, salt, apples, and hats. Services are activities provided by other people, who include doctors, lawn care workers, dentists, barbers, waiters, or online servers, a book, a digital videogame or a digital movie. Taken together, it is the production, distribution, and consumption of goods and services which underpins all economic activity and trade. According to economic theory, consumption of goods and services is assumed to provide utility (satisfaction) to the consumer or end-user, although businesses also consume goods and services in the course of producing other goods and services.

A shadow price is a monetary value assigned to currently unknowable or difficult-to-calculate costs in the absence of correct market prices. It is based on the willingness to pay principle – the most accurate measure of the value of a good or service is what people are willing to give up in order to get it. A shadow price is often calculated based on certain assumptions, and so it is subjective and somewhat inaccurate.

In economics, demand is the quantity of a good that consumers are willing and able to purchase at various prices during a given period of time.

In economics, derived demand is demand for a factor of production or intermediate good that occurs as a result of the demand for another intermediate or final good. In essence, the demand for, say, a factor of production by a firm is dependent on the demand by consumers for the product produced by the firm. The term was first introduced by Alfred Marshall in his Principles of Economics in 1890.

In economics, gains from trade are the net benefits to economic agents from being allowed an increase in voluntary trading with each other. In technical terms, they are the increase of consumer surplus plus producer surplus from lower tariffs or otherwise liberalizing trade.

Intangible good good that does not have a physical nature and can be separated from its creators labor

An intangible good is a good that does not have a physical nature, as opposed to a physical good. Digital goods such as downloadable music, mobile apps or virtual goods used in virtual economies are all examples of intangible goods. In an increasingly digitized world, intangible goods play a more and more important role in the economy. Virtually anything that is in a digital form and deliverable on the Internet can be considered an intangible good. In ordinary sense, an intangible good should not be confused with a service, since a good is an object, whereas a service is an activity or labor. So a haircut is a service, not an intangible good.

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