In economics, goods are items that are usually (but not always) tangible, that satisfy human wants and provide utility. Goods consist of material objects, even complex ones, which are considered differently from non-material goods, that is, from services. The goods can be an economic, natural or technically produced good, capable of being exchanged for other goods (bartering case), or bought for money in a market. The origin of the term “assets“ can be traced back to the Greek meiromai (= to participate, to have a part), and then to the Latin merere (in the sense of “to deserve”, “to earn”).
The concept of “economic good” includes anything useful but available in limited quantity, less than what is needed. For example, air, although very useful, is a good but not an economic good because it exists in nature in unlimited quantity. The limitedness of goods can derive either from nature itself or from legal provisions or from the fact that the availability of the goods themselves requires work, that is the endurance of a sacrifice, a cost.
Utility and scarcity are not intrinsic qualities of the good but derive from the relationship between good and need: something can be useful or scarce for a certain individual or for a certain community of individuals and useless or abundant for another individual or another community. For example, cigarettes are a good for a smoker but not for someone who does not smoke, water may not have “economic value” in the countryside, next to a spring, but it does in the city where it is relatively scarce.
On the other hand, the same thing can acquire or lose its quality of economic good over time, both because its availability varies with respect to needs, and because the tastes and needs of individuals change. Moreover, to have the quality of economic good, something must be accessible, that is, that the individual can get it: the gold existing for hypothesis on the planet Mars is not an economic good for the inhabitants of the Earth who cannot access it.
According to some economists, finally, the economic good must also be material, that is it must consist of something corporeal, ponderable, must possess certain physical and chemical qualities. Therefore, for these scholars, the traditional distinction between tangible goods and intangible goods (i.e. services such as the professional services of a doctor or a lawyer, the lessons of a teacher, etc.) would not exist, but the latter would only be the useful effects of the former. Goods are classified in different ways according to the use to which they are put, the way in which they satisfy needs, the relationships between them.
Goods are said to be direct or consumer or final when they can be directly used to satisfy needs without undergoing further transformation (for example bread, clothing, furniture, etc.); they are said to be indirect or instrumental or investment or production or capital if they are used to produce the direct goods (a tool, a machine, etc.).
Goods are said to be durable or of repeated fecundity or non-durable or simple fecundity according to whether they are capable of providing multiple useful services or only one useful service before completely losing their original properties (for example, bread is a non-durable good, a household appliance is a durable good).
Goods are said to be luxury or basic necessities according to whether they can be done without or are essential to life. They are called substitutes or surrogates or competitors those goods that, physically or chemically similar, are able to satisfy the same need and therefore are substitutable between them (for example butter and margarine, tea and coffee, coal and wood as fuels, etc.); they are instead said complementary those goods that satisfy in the best way a determined need, that is procure the maximum utility, only if used together (for example coffee and sugar, car and gasoline, etc.). They are called joint supply goods those goods deriving from the same production process and therefore it is not possible to produce one without also producing the other (for example, straw and wheat, coke coal and illuminating gas, etc.).
Economic theory has highlighted the existence of this particular type of goods whose distinctive characteristic is that they are consumed jointly by several individuals, members of a society; that is to say that the right to enjoyment is not acquired through the payment of a price, but as members of a social group. No one can therefore be excluded. In reality, however, there are few pure public goods that fully meet this definition; examples include the natural environment, clean air and social justice.
The failure to put a price on such goods, however, entails a serious drawback: the temptation on the part of “selfish” members of society to consume such goods without participating in the production phase. This phenomenon is known as free riding. In order to overcome this drawback, the State, in guaranteeing services of public utility, demands payment of a price which at times, for social reasons, is lower than the average cost of production. Think, for example, of urban transport, street cleaning or public education.
Economists have a strict definition of a public good, and it does not necessarily include all goods financed through taxes. Public goods have two distinct aspects: non-excludability and non-rivalrous consumption. Non-excludability means that the cost of keeping nonpayers from enjoying the benefits of the good or service is prohibitive (it is costly or impossible for one user to exclude others from using the good).
Non-rivalrous consumption is public goods that are consumed by people, but whose supply is not affected by people’s consumption. In other words, when an individual or a group of individuals use a particular good, the supply left for other people to use remains unchanged. Therefore, non-rivalrous goods can be consumed over and over again without the fear of depletion of supply.
Markets often have a difficult time producing public goods because free riders will attempt to use the public good without paying for it. One can overcome the free-rider problem through measures to assure that users of the public good pay for it. Such measures include government actions, social pressures, and specific situations where markets have discovered a way to collect payments.
A Giffen good describes an extreme case for an inferior good. In theory, a Giffen good would display the characteristic that as price increases, demand for the product increases. In the real world application, there has not been a true example of a Giffen good, though a popular albeit historically inaccurate example is the purchase of potatoes (an inferior good) as prices continued to increase during the Irish potato famine.
Some expensive commodities like diamonds, expensive cars, designer clothing, and other high-price limited items, are used as status symbols to display wealth. The more expensive these commodities become, the higher their value as a status symbol and the greater the demand for them. The amount demanded of these commodities increases with an increase in their price and decrease with a decrease in their price. These goods are known as Veblen goods.