Economic goods definition, characteristics, examples, vs free goods

What are economic goods?

Economic goods definition

There is a cost of resources and opportunity cost for economic goods. People use scarce resources to produce them. The producer has to occur marginal cost when producing an economic good.

Opportunity cost is defined as the value of the losing best option as a result of you selecting an option. In other words, opportunity cost is, when we make a decision, the value of the next best option that we lost or we have to give up. In investments, opportunity cost is the loss you take to make a gain or the loss of one gain for another gain. To occur an opportunity cost, you should have two or more options. Otherwise, there is no opportunity cost.

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What is opportunity cost and how to calculate opportunity cost?

Economic goods synonym

Economic goods, also called Scarce goods, are those which have a price i.e. something has to be sacrificed to obtain them.

Opportunity cost occurs as a result of “scarcity – the central economic problem”. Scarcity means the problem of limitation of resource availability when compared to human wants. In other words, resources are not sufficient to fulfill the wants. Scarcity is the central problem in economics that everyone faces including individuals, business firms, governments, and so on. Because of the scarcity problem, individuals, firms and government have to choose to satisfy only some wants. They have to keep unsatisfied other wants. Using knowledge of economics, we can choose that what wants to be satisfied to achieve maximum level of satisfaction. Because economics says how to maximize the satisfaction level.

People use economic goods and non-economic goods (free goods) to satisfy the needs and wants of them. To read more about the difference between needs and wants of the people with examples, kindly click here.

four factors of production are used to produce goods and services.

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What are the four factors of production?

Main 3 characteristics of an economic good

An economic good has three main characteristics. We can discuss them as follows.

1. An economic good must give satisfaction or utility for the consumers. So, if anything does not provide satisfaction for the consumers are not considered as economic goods.

2. There is a scarce of supply when compared with the demand of the economic goods. If something has scarce supply, it may have a price. People would not be prepared to pay for something if there is plenty of it freely available.

3. The economic goods must be transferable. Because to sell a good by one person to another person, it should transferable.

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What are the four types of goods in economics?

Private goods definition, characteristics, examples

Public goods definition, types, characteristics, and issues

Public vs private goods: What are the differences?

Common resources characteristics, examples, & vs public goods

Economic (scarce) goods examples

In the real world, we can identify many examples for (scarce) goods. I will explain some of them as follows.

Food and beverages: When people want to consume foods and beverages, they have to pay some money to buy foods and beverages. Also, producers have to sacrifice some scarce resources to prepare food items.

Laptops and computers: When we consider about a Laptop, the producer has used scarce resources such as Integrated circuits, wires, plastic cases, and displays to produce them. Also people should pay the price of the laptop when they want to buy it.

Healthcare services: Not all economic goods are physical. Many services also can be categorized as economic goods. As an example, we can say healthcare service. Because number of doctors and their service is limited. There is a cost to get the service from a doctor (this fee is paid by a person, insurance or the government). The amount of the doctor’s fee depends on the time taken to treatment and the experience of the doctor.

Differences between economic goods and free goods

Both economic (scarce) and free goods satisfy the needs and want of the people. But there are major differences between them. We will discuss them as follows.

1. The supply of scarce goods is scarce when compare with the demand for them. Because supply is limited. But the supply of free goods is not scarce when compared with the demand for them. Because supply is unlimited

2. There is a cost when producing scarce goods. So, they have a price. There is no cost of production of free goods. So, fee goods don’t have a price.

3. Scarce goods are made by man. Free goods are gifts from nature.

4. The value of the many scarce goods and services is included in national accounts. The value of the free goods and services is not included in national accounts.

Table – economic goods and free goods

We can summarize and distinct the above-mentioned differences as follows.

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Free goods characteristics, examples, & vs economic goods