Goods- Definition and Classifications
Goods
A good is any object that increases the utility of the consumer/ product directely or indirectely. Goods are usually modeled as having diminishing marginal utility. The first individual purchase has high utility; the second has less. Thus, in these and other goods, the marginal utility of additional units approaches zero, as the quantity consumed increases. Assuming that one cannot re-sell it, there is a point at which a consumer would decline to purchase an additional product, even at a price very near zero. This margin of utility is the consumer’s satiation point.
In some cases, such as that of a car, the lower limit of utility as quantity increases is zero. In other goods, the utility of a good can cross zero, changing from positive to negative through time. This means that what initially is a good can become bad if too much of it is consumed. For example, shots of vodka can have positive utility, but beyond some point, additional units make the consumer less happy.
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. In macroeconomics and Accounting, a good is contrasted with a service. In this sense, a good is defined as a physical (tangible) product, capable of being delivered to a purchaser and involves the transfer of ownership from seller to customer, say an apple, as opposed to an (intangible) service, say a haircut. A more general term that preserves the distinction between goods and services is ‘commodities,’ like a flashlight. In microeconomics, a ‘good’ is often used in this more inclusive sense of the word.
Classification of Goods
Goods are Classified in such ways:-
• Consumer’s Goods: Those goods which are directly put to use are called consumer’s goods. These goods are used in our daily life. For example:- Bread, Cloth, Medicines etc.
• Shopping Goods: This classification includes durable or semi-durable items. Shopping goods purchase are characterized by Pre-Planning, information search & price comparisons. It is divided into:
(i) Homogeneous Goods: Homogeneous products are those goods in which it is not possible to make any distinction between the units of the commodity being sold by different sellers.
(ii) Heterogeneous Goods: Heterogeneous goods mean that goods are close substitutes but are not homogeneous. They differ in colour, name, packing, shape, size, quality etc.
• Producer’ or Capital Goods: Those goods which are used in production by other industries are capital goods. Huge amount is invested in these goods. For Example:- Machinery, Plant, etc.
• Intermediate Goods: Some industries manufacture such goods as are processed in some other Industry to produce some need goods. Such goods are called intermediate goods. For example:- Plastic, rubber, aluminum etc.
• Specialty Goods: The purchase of specialty goods is characterized by extensive search to accept substitutes once the purchase choice has been made. The market for such goods is small but price & profits are high.
• Normal Goods: Normal goods are those goods the demand for which tends to increase following increase in consumer’s income, and tends to decrease following decrease in his income. So, there is a positive relationship between consumer’s income and quantity demanded.
• Inferior Goods: Inferior goods are those goods the demand for which tends to decline following a rise in consumer’s income, and tends to increase following a fall in his income. So there is an inverse relationship between income of the consumer and demand for a commodity.
• Necessaries of Life and Inexpensive Goods: In case of necessaries of life and inexpensive goods, the demand remains almost constant irrespective of the level of income.
• Luxury Good: A luxury good means an increase in income causes a bigger % increase in demand.
Popularity: 1% [?]
