There are different types of goods that we are enjoying in our daily life. The brief description of different types of goods is below;
The goods that consumers use for consumption purposes are consumer goods. Food, clothes, jewelry, etc. are an example of consumer goods. In economics by consumer goods, we mean any tangible things produced and purchased by final users to satisfy their wants. Raw materials and intermediate goods are not consumer goods.
Producer goods are raw materials or intermediate goods essential to make or produce consumer goods. Therefore, producers’ goods are also known as semi-finished products used as inputs in the production of other final goods. Producer goods either be converted into the final or part of the final product or drop their separate character in the manufacturing stream. The value of such goods has nothing to do with the calculation of gross national product of the nation as the inclusion of such goods would involve double counting of costs and pilot to an overstated estimation of GDP.
Capital goods are those goods that needed to produce other goods and services and particularly they are tangible and physical goods used in further production. They include tools; pieces of equipment, machinery, vehicle, working machines, etc., and they are not purchased for final consumption rather they are essentially used by entrepreneurs and producers to produce further final/consumer goods and services.
Normal goods are goods whose quantity demanded increases as the consumer’s income increases and vice versa. They have a positive relationship between the consumer’s income and the quantity they demanded. For example, if the income of the consumer increases then he/she will purchase more nutritious food.
If we compare normal goods and inferior goods it’s not always necessary to say that the quality of normal goods is better than inferior goods. There is no better or worse when discussing normal versus inferior goods until it is not in the financial eye.
Inferior goods are those goods whose quantity demanded decreases when consumer income rises and vice versa. It means that it is one of which the consumer purchases less with an increase in income. An inferior good is the opposite of normal goods. It can be viewed as anything a consumer would demand less even if they had a higher level of income.
In reality, there is not a particular or specific example of an inferior good. While saying inferior goods it does not mean that they lack the quality or are bad to purchase. When we compare the cost of the product or we do purchase decisions based on a budget then some goods may consider inferior for a particular consumer. But at the same time, these goods are superior or luxurious for other classes of society. Therefore the term inferior goods are related to the budget and financial affordability of a particular consumer.
A Giffen good is a product that consumer consumes more when the price of goods rises and consume less when the price decreases. Giffen goods are identified or named after Scottish economist Sir Robert Giffen. According to him, if the consumer does have very low income, and when the price of rice increases consumers buy more rice and reduce the demand for meat. They substitute rice for meat. The concept of Giffen goods applies to very poor communities with a very limited choice of goods.
If a person can use one good instead of the next good then such goods are substitution goods. It means the goods that at least partly satisfy the same needs of the users and thus can be used to replace other goods are called substitute goods. For example, goods such as tea and coffee, pen and ball pen, Sunsilk and dove shampoo, Rara and Waiwai noodles, etc. are substitution goods. There is a positive relationship between the price of one good and the demand for other goods. If the higher the price of tea, the higher will be the demand for coffee.
If a person uses one good along with the next one then they are complementary goods. In this case, the use of the next goods is necessary for the use of the first goods. Therefore, these two goods are strongly related to each other. For example, cups and saucers, cars and petrol, pen and ink, a mobile set and sim card, etc. There is a negative relationship between the price of one good and the demand for other goods. If the higher the price of the pen, the lower will be the demand for ink.
In the simplest sense of understanding, public goods are those that are available free to everyone. They are provided without the motive of earning profit from all the members of society. So public goods are common to all and their ownership remains with the society. They are available to all members of a society either by the government or any individual or organization. Public goods may finance by tax revenue and available to all in equal quantity.
Many public goods may at times be subject to excessive use has resulted in negative externalities affecting all users. The problem of public goods is related to the problem of free-rider. There are two principal features of public goods and they are:
Non-rivalry: This refers to a situation in which if a good is consumed, it doesn’t lessen the quantity accessible for others. For example, the benefit obtained by one from a street light doesn’t diminish the light available for others but eating an apple would.
Non-excludability: It means if one person consumes it, it is impossible to restrict others from consuming them. For example road, national defense, etc.
A private good is good when the purchase by one consumer reduces the quantity available to others. Privately owned business firms produce private goods and consumers purchase to increase the utility or satisfaction. The majority of the goods and services in a market economy are private goods, and the measurement of their prices is subject to some degree of the market forces of supply and demand. Pure private goods are both excludable and rivalries, where excludability deals with the situation in which an entrepreneur can put off some people from consuming or using the good or service based on their ability or willingness to pay, and rivalries indicate that one person’s consumption of a product reduces the amount available for consumption by another.
Difference between Private and Public Goods
Major differences between private and public goods are as below;
- Private goods or services are products that must be purchased for the aim of consumption. Whereas public goods or services are the products that are available free to the public.
- In the case of private goods if it is consumed or purchased by anyone then it will reduce the quantity available to others (rivalry) but in the case of public goods consumption by anyone does not reduce the amount available for others (non-rivalry).
- Users can be excluded from the consumption of the goods if they do not pay to the seller of the goods in the case of private goods (excludability) but in the case of public goods, people are not excludable from their consumption even they don’t pay anything (non-excludability).
- Private goods are subject to rejection by the users if they won’t like them but in the case of public goods consumer can not reject even if they don’t like.
- There are fewer positive as well as negative externalities of private goods but for public goods, they have both positive as well as negative externalities.
However, there are some cases in which public good is excludable, and private good is non-excludable. For example, the post office is an excludable public good as even though the service has been offered for the public, there are low costs such as stamp expenses that may prevent people who have not paid from using it. Private goods such as basic AM radio shows are considered non-excludable as anyone with a radio can consume them.
Those goods whose demand is more than supply i.e., they are scarce are called economic goods. E.g., Building, furniture, food grains, etc. They are limited in availability and are man-made things. Due to the shortage, economic goods have a positive price. Thus, payment has been made to get economic goods. Economics only does the study of economic goods.
The gifts of nature are called free good. They are available in large quantity i.e., in unlimited quantity and the supply is much more than the demand. E.g., sunshine, rainfall, air, etc. In brief, we can identify free goods as goods that hold value or utility, but which are not rare or scarce. No payment is required to obtain free goods and all of us can get access to them without making any payments. They have value in use but no in exchange. Any good that is free good today may become an economic good tomorrow. Thus, free good may not be permanently free.