Basic Concepts in Economics

Like other sciences, Economics also
has concepts to explain its theories. A
complete and clear grasp of their meaning is necessary when the theories associated with them are studied. Only a preliminary
acquaintance is now attempted here.

Goods and Service:
Both goods and services satisfy human
wants. In Economics, the term ‘goods’ implies the term ‘services’ also, unless specified otherwise.Goods (also called ‘products’, ‘commodities’,‘things’ etc).
a. as material things, they are tangible;
b. have physical dimensions, i.e., their physical attributes can be preserved over time;
c. exist independently of their owner;
d. are owned by some persons;
e. are transferable;
f. have value-in exchange;

Kinds of Goods (and Services):

a. Free and Economic goods: Free goods are available in nature and in abundance. Man does not need to incur any expenditure to own or use them. For example air, and sun shine. Water was also an example in the past, but at present it has exchange value. So it is not a free good.

Milton Friedman, a Nobel laureate,
popularises a saying: “There is no such thing as a free lunch”. He means that it is impossible to get something for nothing.
Even those offered ‘free’ always costs a person or the society as a whole. Its cost,however, is hidden. It is an external it. Someone can benefit from an externality or from a public good, but someone-else has to pay the cost of producing these benefits.In Economics, it refers to ‘opportunity cost’.On the other hand, economic goods are not available in plenty. They are scarce in supply. Man has to
spend money to own or use them.

b. Consumer goods and Capital goods:
Consumer goods directly satisfy human wants, TV, Furniture, Automobile etc.
Capital-goods (also called producer’s goods) don’t directly satisfy the consumer wants. They help to produce consumer goods. For example, machines do not directly satisfy the consumers, but in factories, the manufacturers need them.

c. Perishable goods and Durable goods:
Perishable goods are short-lived. Their life-span is limited. For example fish,fruits, flower etc do not have a long life.Durable goods and semi-durable goods have a little longer life-time than the Perishable goods. For example,a table, a chair etc.

Along with goods, services are produced
and consumed. They are generally, possess
the following:
Intangible: Intangible things are not physical objects but exist in connection to other things, for example, brand image, goodwill etc. But today, the intangible things are
converted and stored into tangible items such as recording a music piece into a pen-drive. They are marketed as a good.
Heterogeneous: Services vary across regions or cultural backgrounds. They can be grouped on the basis of quality standards. A single type service yields multiple experiences. For example,music, consulting physicians etc.
Inseparable from their makers:Services are inextricably connected to their makers. For example, labour and labourer are inseparable; and,
Perishable: Services cannot be stored as inventories like assets. For example,it is useless to possess a ticket for a cricket-match once the match is over.It cannot be stored and it has no value-in-exchange.

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