Introductory Economics

Classification of Goods

Based on Supply:

Free Good: A good or service that has no price is called a free good. The air that we breathe satisfies us. But we do not pay any price for such goods. So, these goods are free goods and they are not scarce. These goods are the free gift of nature. Their supply is more than the demand and one can get to the extent they need. No efforts are needed to be put forth by humans to secure free goods. They have value in use but no value in exchange. e.g. sunshine, rainfall, air, etc.

Economic Good: These are the goods which are produced through human efforts and are to purchase at a given price. Supply is less than demand. They have value in use and value in exchange. E.g. Building, furniture, grains etc. Such goods are called economic goods and these goods are scarce.

Based on Transferability: as given by Marshall, goods are classified external and internal goods.

• External goods are classified as material and personal goods. Material goods are further classified as transferable (such as land, building, furniture etc) and nontransferable (such as degree certificate, driving license etc.)
• Personal goods are also classified as transferable( goodwill of business) and nontransferable (friendship, courage etc)
• Internal goods are nontransferable like personal qualities like ability, intelligence etc.)

Based on consumption

Consumer Goods: These are the goods from which consumers directly derive the satisfaction. These are otherwise known as goods of first order in view of their ability to give direct satisfaction. Food, cosmetics, cloths, books, pens, etc

Producer Goods: Those goods which help to produce other goods. These can be used both by consumers as well producers , because it depends how the good is used. From the consumers’ point of view they give satisfaction indirectly. The examples are machines, factory buildings, raw material, etc. the chance of a producer good to become a consumer good is possible based on its usage. For instance, electricity when used at home it becomes a consumer good and the same becomes a producer good when used in an industry.

Based on Durability

Mono period Goods: Those goods which are used only once to satisfy a need are called mono period goods. They cease to exist once their use was over. e.g. all food items and productive resources like seed, fertilizers etc.

Poly period Goods: Those goods which are used time and again. Relevant examples are machinery, implements, buildings, etc.