1.4 Types of goods and services
Goods and Services
A commodity or a physical, tangible item that satisfies some human wants or needs or something that people find useful or desirable and make an effort to acquire it is known as good. Goods that are scarce are called economic goods whereas those whose supply is unlimited and that require neither payment nor effort to acquire such as air, sun light etc. are called free goods.
The economic assets taking a tangible physical form such as house, clothes, shoes, utensile are known as goods. It is such product that is bought and sold commercially in the market, which can increase the economic welfare of people.
Intangible product such as accounting, banking, clearing, consultancy, education, insurance, transportation, medical treatment etc. are known as services. Services are closely associated with goods, such as the combination of a diagnosis with the administration of a medicine. No transfer of ownership or possession takes place when services are exchanged and they cannot be stored or transported.
Services are instantly perishable and they are only felt when exchanged and consumed but do not physically exist!
Types of Goods and Services
There are various types of goods. Different economists have classified it into different types on the different bases. Some types of goods are discussed below:
i) Normal goods
The goods, whose consumption increases with the increase in income of consumer such as clothes, shoes etc. are known as normal goods. They depend upon income level of consumer.
ii) Inferior goods
An interior good is a type of good for which demand declines as the level of income increases. An interior good is the opposite of a normal good, which experiences an increase in demand along with increase in the income level. For example, low quality rice which is consumed by poor people. When their income increases, they start to consume high quality rice as a result the demand of low quality rice will decrease.
iii) Giffen goods
A Giffen good is a good for which demand increases as the price increases and falls when the price decreases. A Giffen
good has an upward sloping demand curve, which is contrary to the fundamental law of demand. The term Giffen is named after the economist Robert Giffen, who analysed this good at first.
iv) Substitute goods
- The goods that can be used in the place
of other goods is known as substitute goods.
In other words, if there is positive relation-
ship between price of one good and demand
for another, the good is called substitute goods.
For example Coke, Pepsi, tea and coffee etc.
V1. Complementary goods
- A complement good is a good, whose use is related to the use of another associated good. When price of one good increases then demand for another good decreases in complementry goods. For example: Bike & Petrol Sugar & Sweet
Pen & Ink etc.
vi) Private goods
- A good, which is consumed by one person, may not be available for other is known as private good. A private good is rival and excludable. Examples of private goods are clothes, a car bought by a person, a house built by a man etc. A house built by a man is excludable; he/she
does not have to allow anyone else to reside in his house.
vi). Public goods
A good, which is consumed by all the community without exclusion to anyone is known as public good. The consumption of public good is not decided by the individual consumer but by the society as a whole and which is financed by taskation.
viii) Economic goods
Economic goods are those which have a price and their supply is less in relation to their demand or is scarce. The production of such goods requires scarce resources having alternative uses. For example, land is scarce and is capable of producing rice or sugarcane.
(ix) Free goods
A free good is a good with zero opportunity cost. This means it can be consumed in as much quantity as needed without reducing its availability to others. They are free gifted from nature like air, water, sunlight and so on.
x). Luxurious goods
- Luxurious goods are those goods which
are highly demanded by rich class people in society. They demand those goods for prestige in society like as gold, diamond, silver, expensive and so on.