We explain what goods are in economics, what types exist and what the characteristics of each one are.
What are assets?
In economics, goods are called the materials and goods that enable individuals to satisfy their needs. Generally these are specific, tangible elements that can be purchased on the market in exchange for a certain amount of money.
Economics, in principle, distinguishes between two essential types of goods: free goods and economic goods. Free goods are those provided by nature and so abundant that they do not require any form of production and commercialization, as is the case of breathable air or sunlight.
For its part, Economic goods are those that are in one way or another scarce and limited and therefore require to be produced, marketed and consumed. Only these are of interest to the economy. For example: a vehicle, a house, an appliance.
This way, economic goods are assigned a monetary value (that is, a price) based on the difficulty or ease of its production and marketing. A good that is very scarce or very difficult to produce will normally have a high cost, while one that is abundant or easy to produce will have a low cost.
Something similar happens with respect to the demand for goods: the more potential consumers a good has, the higher its price will be; while a good that no one wants will always see its price reduced. This is known as the “law of supply and demand.”
The purpose of the study of economic goods is to classify and organize them according to their behaviors, and thus better understand the functioning of the market and the dynamics of production and consumption. The fundamental postulate of economic science is that Goods are scarce, while human needs are infinite
Types of goods
There are many types of economic goods and different criteria to classify them, such as:
According to its usefulness that is, its ability to satisfy the needs of different types of consumers. In this case we can talk about:
- Final or consumer goods ready to be purchased directly and satisfy needs. For example: food, homes, cars or appliances.
- Intermediate or production goods incapable of satisfying the needs of consumers, but necessary for the production process of other goods. For example: screws, metal beams, wooden boards or raw materials.
- Capital or investment assets necessary to sustain, improve or accelerate the production of other goods and obtain a subsequent benefit. For example: tools, machinery, electricity or money.
According to its durability that is, its ability to meet its objectives over time. In this case a distinction is made between:
- Durable or consumable goods capable of satisfying a need over time, suffering minimal margins of wear that warrant maintenance, instead of replacement with a new good. For example: a home, a car, a refrigerator or agricultural machinery.
- Non-durable or non-fungible goods characterized by the rapid exhaustion of their usefulness, either with the passage of time or at the moment of use. These are goods that require frequent replacement. For example: food, drinks, medicines, matches or paper.
According to their availability in society that is, depending on how easy it is to access them. In this case a distinction is made between:
- Public goods easily accessible as they are considered the common property of society, available to everyone. For example: water, electricity and other basic services provided by the State.
- Private property with restricted access, since only their owners or owners can use them. For example: a home, a car or land.
According to its transportability that is, depending on whether or not they can be moved from one place to another. In this case a distinction is made between:
- Personal property which can be easily moved from one place to another. For example: a motorcycle, a book, a chair or a plate of food.
- Real estate which cannot be moved from one place to another easily. For example: a house, a piece of land, a fruit plantation or a factory.
According to your commercial behavior that is, how they behave in relation to the consumer's income (that is, the money available). In this case a distinction is made between:
- Normal or ordinary goods whose consumption increases when the consumer's income increases and its consumption decreases if the income also increases. These assets are classified, in turn, into:
- Superior or luxury goods those whose consumption increases much faster than consumer income does, so they always remain out of the reach of the majority. For example: designer clothing, jewelry, leisure or travel services.
- Essential goods those that are necessary to live and whose consumption always increases at a rate lower than the increase in the consumer's income. For example: water, bread, shoes or clothes.
- Inferior goods whose consumption decreases as the consumers' income increases, that is, they are quickly replaced by normal goods. This is because they are perceived as goods of low quality (even if they are not) or of little need. For example: fast food, second-hand clothes, low-quality technology or old cars.
According to its relationship with other consumer goods that is, according to its behavior with other goods available on the market. In this case a distinction is made between:
- Substitute goods whose consumption is mutually opposed, that is, when one of the two is consumed in substitution of the other. For example: regular coffee and decaffeinated coffee, sugar and sweetener, diet soda and regular soda, or butter and margarine.
- Complementary goods whose consumption instead of opposing it complements, that is, requires the consumption of the other to satisfy the need. For example: coffee and sugar, a car and gasoline, an appliance and electricity to use it, or a pencil and paper to write.
Continue with: Product
References
- (sf). “Economic goods and free goods.” Learn economics
- The Encyclopaedia Britannica. (sf). “Consumer Good”. Britannica
- Sarmiento, M and others. (2018). Elements of economics. National University of Santiago del Estero.
