Category: 

What Are Economic Goods?

Article Details
  • Written By: Jerry Morrison
  • Edited By: Shereen Skola
  • Last Modified Date: 21 November 2016
  • Copyright Protected:
    2003-2016
    Conjecture Corporation
  • Print this Article
Free Widgets for your Site/Blog
President Richard Nixon had an entire speech prepared in case the Apollo 11 astronauts became stranded on the Moon.  more...

December 8 ,  1965 :  Pope Paul VI promulgated Vatican II into ecumenical law.  more...

Economic goods are typically thought of as tangible items that meet an economic want. An economic want is something that can be satisfied by barter or financial exchange. Such items must be in limited supply, useful and transferable. Intangible items, such as actions and services, can also be considered economic goods if they are performed for hire.

Those things that are freely available, such as sunshine and gravity, are not economic goods. These types of items are often termed free goods. Though these items might have great utility, their abundance makes an economic exchange to secure them unnecessary. The limited supply of an item helps to establish the cost that must be paid to secure its possession.

The utility of an item is its capability of satisfying an economic want. This may be a technical specification or a subjective judgment. How well an item satisfies the want and the availability of that item determines its economic value. The perfect item may be scarce, while there remain a range of less acceptable items in greater supply. In this situation, the optimum item would be dear and the less useful items more affordable.

Ad

An item might be scarce or in limited supply and also the perfect thing to satisfy a desire. If the item is not transferable by means of an exchange, then it is not an economic good. It could not come into possession of the individual with the economic want. If an item exists but is not for sale, it is not transferable and thus not an economic good. The same would be true if it were not physically possible to carry out the transaction.

Consumer economic goods are those that are bought and taken into possession by the end user. These may be tangible items or intangible services. A washing machine is a tangible item, the services of a washing machine repairman is an intangible. The economic value of a good is determined by its supply and utility in satisfying an economic want. This want can be a highly subjective thing, depending on individual perception and taste.

Commercial economic goods are often items purchased by a retailer for direct resale to consumers. They may also include the machinery, raw materials, and services necessary to manufacture consumer goods. The values of these items are determined more empirically by technical requirement and physical availability. Conversely, the values of consumer economic goods are subject to manipulation by suppliers. Economic want can be influenced by advertising and availability by production quota.

Ad

You might also Like

Recommended

Discuss this Article

turquoise
Post 3

@serenesurface-- I think the other commentor's explanation is good. An economic good is a good that has utility and scarcity. The whole reason why economic goods have a cost is because of the scarcity. Basically when we consume that good, it means that someone else can't. And depending on how high the demand is for that good and how scarce it is, the market will set a price for it. We then exchange a price for that good.

Don't get confused with economic goods and public goods. Although public goods may also be "free," they are also economic goods. The lighting in your street is a public good and an economic good. You may not be paying for it directly and everyone benefits from it but it has a cost and it's a scarce good. The materials required to make it cost money and so does electricity. And we do actually pay for it with taxes.

literally45
Post 2

@serenesurface-- Absolutely. Water is scarce and it fulfills an economic need, so it's an economic good. There is no rule that economic goods have to be expensive. There are many factors that affect the price of a good. It depends on demand, supply and other factors. There is sometimes also the effort to provide essential goods at more affordable prices and water is an essential good.

If it ever occurs (hopefully not) where water is extremely scarce, then the price will certainly go up. All natural resources are scarce but the price is set based on scarcity. There are efforts for sustaining these resources but a lot more has to be done.

serenesurface
Post 1

Is land an economic good? What about water?

I guess these are scarce goods but shouldn't scarce good be fairly expensive? Water isn't very expensive so does it count as an economic good?

Post your comments

Post Anonymously

Login

username
password
forgot password?

Register

username
password
confirm
email