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A good in economics is any object, service or right that increases utility, directly or indirectly, not to be confused with the adjective 'good', as used in a moral or ethical sense (see Utilitarianism and Consequentialism). A good that cannot be used by consumers directly, such as an 'office building' or 'capital equipment', can also be referred to as a good as an indirect source of utility through resale value or as a source of income.
In macroeconomics and accounting, a good is contrasted with a service. A good here 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'. In microeconomics, a 'good' is often used in this more inclusive sense of the word.
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Utility characteristics of goods
A good is an object whose consumption increases the utility of the consumer, for which the quantity demanded exceeds the quantity supplied at zero price. Goods are usually modeled as having diminishing marginal utility. The first car an individual purchases is very valuable; the fourth is much less useful. Thus, in these and similar 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 car, even at a price very near zero. This margin of utility is the consumer's satiation point.
In some cases, such as the above example 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!
Types of goods
Goods can be defined in a variety of ways, depending on a number a characteristics. These are listed in the table below:
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See also
References
- Bannock, Graham et al. (1997). Dictionary of Economics, Penguin Books.
- Milgate, Murray (1987), 'goods and commodities,' The New Palgrave: A Dictionary of Economics, v. 2, pp. 546-48. Includes historical and contemporary uses of the terms in economics.
Article is licensed under GNU Free Documentation License.
It uses material from Wikipedia.org Original article is here.
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