Types of Goods and Services
In the field of economics, goods, and services are the essential commodities that cater to human needs and wants. According to the renowned economist Marshall, goods are anything that can satisfy human wants, be they tangible or intangible. Examples of goods range from physical items such as books, chairs, shoes, food, and clothes to emotional aspects like love, affection, and friendship.
This classification of goods allows for the evaluation of their respective monetary value, production, and consumption in the marketplace. Goods can be further categorized into durable and non-durable goods based on their lifespan. On the other hand, services are the non-physical activities that are provided to consumers in exchange for payment.
These include professional services like legal, medical, and financial assistance and personal services like hairdressing and house cleaning. Services require human capital and expertise to deliver, and their quality is heavily reliant on the skills and qualifications of the service provider. In summary, goods and services are fundamental economic concepts that play a significant role in the production, distribution, and consumption of resources in society.
The following are the major types of Goods and Services:
a) Normal goods: Normal goods are products whose demand increases when the consumer’s income increases and decreases when their income decreases, all other things being equal. These goods are typically purchased in greater quantities as consumers have more disposable income. Examples of normal goods include branded clothing, cars, high-end electronics, and luxury goods.
b) Giffen goods: Giffen goods are a unique type of inferior goods, where the demand increases as the price increases. In other words, when the price of a Giffen good rises, the consumer perceives it to be of higher quality and prestige, which in turn increases the demand for the good. These goods are generally inferior staple foods such as potatoes and rice, which form a significant portion of a low-income household’s consumption.
c) Inferior goods: Inferior goods are those whose demand decreases as the consumer’s income increases and vice versa. As income rises, consumers tend to switch to higher-quality alternatives, decreasing the demand for inferior goods. Examples of inferior goods include non-branded products, low-quality food products, and public transportation services.
d) Luxury goods: Luxury goods are high-end products that are expensive and often have a high degree of exclusivity. These goods are typically associated with high social status and can be purchased by only a small segment of the population. Examples of luxury goods include designer clothing and accessories, high-end automobiles, private jets, and yachts. The demand for luxury goods is not necessarily income-dependent but is often driven by the consumer’s desire for prestige and exclusivity.
e) Substitute goods: Substitute goods are those that can be used in place of each other. As the price of one good increases, consumers may choose to purchase a substitute good instead, causing a decrease in the demand for the original good. Examples of substitute goods include coffee and tea, petrol and car, ink and pen, butter and margarine, and different types of gasoline.
f) Complement goods: Complement goods are those that are typically consumed together. An increase in the price of one good often results in a decrease in demand for both goods. For example, if the price of gasoline increases, the demand for automobiles may decrease as well. Other examples of complementary goods include peanut butter and jelly, computers and software, golf clubs and golf balls, Shoes and Shoelaces, etc.
g) Private and public goods: Private goods are products that are excludable and rival in consumption, meaning that access can be restricted to paying consumers and that consumption by one person reduces the amount available to others. Examples of private goods include clothing, food, and electronics.
Public goods, on the other hand, are non-excludable and non-rival, meaning that they are accessible to all, and one person’s consumption does not affect the availability to others. Examples of public goods include public parks, street lighting, and national defense.
h) Veblen Goods: Veblen goods are a unique type of luxury good, where the higher the price, the higher the demand. The demand for these goods is driven by the consumer’s desire for status and exclusivity rather than the product’s utility or quality. Examples of Veblen goods include high-end luxury cars, designer clothing, and expensive jewelry. Veblen goods often defy the law of demand, where the price and demand have an inverse relationship, and instead, they exhibit an upward-sloping demand curve.