# Good (economics)

In general, a good is used in economics to describe all material and immaterial resources that serve to satisfy needs .

## General

Economic good can be divided into:

In the narrower sense, goods are understood as economic goods ; These are defined by their scarcity (therefore also called scarce goods ): they are goods that are not available in the desired quality and quantity at any time and in any desired location. Important properties of economic goods are their exchangeability and marketability .

## meaning

In economics, it is assumed that people have an infinite number of needs ("insatiability axiom"). This means that the required quantity is always greater than the available quantity . The economic goods defined as a result of this scarcity form the basis of the definition of economic activity . Since the provision of goods causes costs , we are forced to act economically.

Economics is the decision about scarce goods. This fact is viewed by many as a consistent, space and time-independent and ideology-indifferent set of questions that operationally and appropriately precisely determines the business-related object of knowledge.

Goods are therefore a central element of any economic study. Due to its general definition, economics de facto record all resources and services as “good” that generate any benefit . Ultimately, it is goods that determine economic welfare from an economic point of view .

Due to their welfare effects, one of the fundamental tasks of economic policy is to provide framework conditions that enable the best possible allocation of goods to consumers .

### Deployment and distribution

What motivates market participants to produce or provide goods and how are they distributed? Böventer and Illing (1997) state that:

#### Provision

It would be most enjoyable if the goods were provided as gifts from nature or for fun and altruism . Another possibility is authoritarian coercion . However, these reasons alone would not be sufficient to ensure a satisfactory supply of goods in modern industrial societies. Incentives are absolutely necessary ; In addition to non-monetary incentives such as praise, medals or prestige, financial incentive systems would be important here - see also the incentive-contribution theory by Simon, March and Barnard. What is meant are concrete achievable income or possible savings in expenses.

#### distribution

The division of labor and the associated fact that hardly anyone is able to produce even one good on their own prompt us to trade . Due to the scarcity of goods, rationing must take place. There are four major principles by which distribution can be made:

1. Market . In a competitive economy in which all goods are freely exchanged on markets, a Pareto-efficient allocation of resources is achieved. The principle of willingness to pay applies: whoeverpaysthe market price gets the good.
2. Authority . A form of coercion: by means of self-chosen or democratically determined criteria, laws are passed that determine the distribution. Problems here are possible corruption or the factual impossibility of an authority to know all the needs of those affected.
3. Negotiation . An agreement process brought about by discussion. The question remains whether all those affected can actually meet or are represented by representatives. Positions of power or individual negotiating skills have no small influence; even tradition can be an independent principle of allocation.
4. Choice . Those affected decidedirectlybetween a selection of alternatives . Here, too, the implementation turns out to be complicated.

The individual principles can never be found in their pure form - the social market economy is a combination of market mechanism and partial control by the state, e.g. B. in the provision of public goods and in the use of taxes or subsidies .

## Classification: types of goods

Essential contents of the classification go back to Erich Kosiol . These include, among other things, the distinction between real and nominal goods, material and immaterial goods, derived and original goods.

### Depends on availability

A distinction can be made here between free and scarce goods.

Free goods

A good is free if it is available in such large quantities in the relevant area at the time under consideration that every person can consume as many units of the good as he wants, or until his or her saturation level is reached.

Air to breathe or water are often cited as examples . These blanket examples are problematic because none of the three aspects mentioned in the definition should be neglected when considering. In 2011, for example, the air on the Baltic Sea in Germany is free - but in some cities it is managed indirectly (see environmental zone ). Also think of the air in the International Space Station , the transport and processing of which incurs costs.

Since free goods are available in sufficient quantities , they have no price . In a market economy system, the price is the indicator of the scarcity of a good. So the following applies: the scarcer a good, the higher its price. The terms price and costs must be understood here broadly, as an individual often does not have to pay for the use of a good.

Free goods are not to be confused with common goods . These are freely accessible to all customers, but their provision is usually associated with costs. For example, a municipality or a private supermarket operator can offer free parking spaces for motorists. However, the availability of parking spaces is naturally limited and can therefore be scarce (→ tragedy of the commons ).

Scarce goods

In contrast to free goods, scarce goods (including economic goods, economic goods or economic goods) are not available in sufficient quantities. Scarce goods must be produced or made available through human economic activity. In a market economy system, the balance between the scarce supply of goods and the much higher demand is usually made through the price. For example, when a good is priced high, there is generally less demand than when it is lower. Economic goods are divided into real goods ( material goods , services and rights) and nominal goods ( money and monetary means of payment ).

### For excludability and rivalry

Types of goods according to the criterion of excludability (excludability) of other potential users
Types of goods according to excludability and rivalry
Degree of rivalry
= 0
Degree of rivalry
= 1
Degree of exclusion
= 0
public good
(e.g. dyke)
Common good
(e.g. overcrowded inner city street)
Degree of Exclusion
= 1
Club good
(e.g. pay TV)
Private goods
(e.g. ice cream)

Here a distinction can be made between goods that enable exclusion and goods that do not allow exclusion . Most everyday goods make it possible to exclude people from their consumption. However, this is not the case with air, for example; in order to exclude a person from consuming the air, the air around them would have to be pumped out. Typical other examples of goods that do not allow for the exclusion of individuals are national defense (you cannot exclude an individual citizen from being militarily defended in the event of an attack) or dykes (all people who live behind a dyke are exposed to flooding protected - the exclusion of individuals is not possible). However, there is a tendency towards increasing excludability: today, goods such as television or the use of roads allow, unlike in the past, the exclusion of individuals (via pay TV and tolls ). In other words: Achieving excludability is only a question of effort - through increased expenditure (mostly costs), the dike mentioned could be built around a certain house, for example. That in turn would exclude it from protection.

Types of goods according to the rivalry in consumption

A distinction is made here between rival goods and non-rival goods . Rival goods are characterized by the fact that the consumption of a good by one consumer hinders or prevents the consumption of the same good by another consumer. Typical non-rival goods are e.g. B. Watching TV (if you watch TV in the neighboring house, your own reception will not be impaired) or breathing. However, the rivalry or non-rivalry also depends on the situation: If you watch a football game on pay TV in the corner bar, the consumption of the individual is restricted with each additional bar guest. Likewise, consumer rivalry increases significantly when breathing in a stuck elevator. In contrast, bread that one consumer eats cannot be consumed in full by another person at the same time. In this category, too, there are gray areas: the use of the motorway is initially not rival, since a second car on the motorway does not disturb the individual driver. However, when traffic increases significantly, the use of the motorway becomes rival.

### According to objectivity (materiality)

In this regard, a distinction is made between material goods (also referred to as "material goods", e.g. house) and immaterial goods . The latter can in turn be subdivided into services (e.g. doctor's office) and non-material goods (e.g. patents ). Here, too, the transition is fluid. A car is undoubtedly a material asset, while customer service on the said car is a service.

### According to purpose and duration of use

Types of goods according to their intended use

A distinction is made here between consumer goods (e.g. food, books, private cars, furniture, etc.) and production goods (e.g. a commercial ice machine, company building, company car, gasoline, electricity, water, etc.). Capital goods are bought by companies and are used to manufacture consumer goods, while consumer goods are bought by private households.

Types of goods according to their useful life

These goods can be further differentiated according to their expected useful life ; a distinction is made here between permanently usable goods (ie goods whose expected useful life is more than one year) and non-permanently usable goods (i.e. goods with an expected useful life of less than one year).

Summary
Types of goods according to purpose and duration
Production good Consumer good
durable good
(commodity i. w. S. )
Capital goods
(e.g. production machines, office buildings)
Consumer goods
(e.g. residential buildings, furnishings)
short-lived good
(consumer goods in the broader sense)
Intermediate goods
(e.g. lubricating oil, paints, electric motors)
Consumables
(e.g. food)

Consumer goods that are used up after a single use, are called consumer goods , consumer goods, which can be used for an extended period, as durable goods . A coffee machine in private households is a consumer good because it is used over a longer period of time, but the associated coffee powder is a consumable good because it can be used only once.

Production goods that are used in the company for a longer period of time are called capital goods , production goods with a shorter expected useful life are called intermediate goods . A painting machine used in a company is therefore an investment good due to its longevity , whereas the auxiliary paint used by it is a wholesale good.

### According to production property

Separation into direct goods or raw materials that flow directly into production (e.g. metal for a car plant) and indirect goods that are used to maintain operations (e.g. sandpaper, office furniture). The latter are often referred to as MRO goods in the context of electronic procurement (from the English Maintain - Repair - Operate).

### According to demand behavior

Demand behavior depending on the price of the good
• Ordinary goods are characterized by the fact that they are in lower demand when the price rises (negative price elasticity ).
• In contrast , a Giffengut is consumed more as the price rises (positive price elasticity).

This so-called price effect can be represented by the price-consumption curve and the demand curve .

Demand behavior depending on income
• Inferior goods arein lower demandas incomes rise(negative income elasticity :).${\ displaystyle \ eta _ {i} \ leq 0}$
• Normal goods are in greater demand as incomes rise (positive income elasticity:). ${\ displaystyle \ eta _ {i}> 0}$
• When necessary goods (or saturation goods ) the demand falls growth continuously (the Engel curve extends correspondingly concave), until the amount reaches saturation (income elasticity: ).${\ displaystyle 0 <\ eta _ {i} \ leq 1}$
• In the case of superior goods (or luxury goods ), on the other hand, the growth in demand continues to rise (the Engel curve is convex), i. H. income rises even disproportionately more in demand (income elasticity: )${\ displaystyle \ eta _ {i}> 1}$

This so-called income effect can be represented by the income-consumption curve and the Engel curve .

Demand behavior between two goods
• Substitute goods are goods that replace each other, i.e. are interchangeable. As a result, demand for a substitute good increases when the other good becomes more expensive.

In this case, different degrees of distinction of substitutability: Can two goods are replaced completely with each other, without any additional cost , quality differences or similar incentives arise that the consumer could give rise to prefer a product that is called a perfect or complete substitute good . The marginal rate of substitution of one good for the other is constant. Typical substitute goods are bread and rolls.

If both goods are not completely replaceable by the other, one speaks of incomplete substitutes . The incomplete substitutability is due to qualitative or price differences between the goods. Examples of incomplete substitutes are CDs and audio tapes; Although both allow you to record and play music, they differ in quality and storage space.

• Complementary goods are goods that complement each other when used. You will be asked together. Consequently, the demand for a good decreases when the price of its complementary good increases.

Here, too, different degrees can be distinguished: If two goods can only be consumed together, one speaks of perfect complements - buying one good is pointless without buying the other good at the same time. Expressed mathematically, the benefit for the consumer ( ) results from . Examples of perfect complements are right and left gloves. ${\ displaystyle U}$${\ displaystyle U (x_ {1}, x_ {2}) = \ min \ {x_ {1}, x_ {2} \}}$

In contrast, incomplete complements are those goods that complement each other, but are also in demand individually on the market - e.g. B. Computer , printer and screen .

Demand behavior for social effects

The following cases represent peculiarities in the demand for goods that are caused by social effects:

• Veblen effect : Because something is expensive / exclusive (even if it has no use), there is demand
• Snob effect : demand falls (especially among regular customers) when certain groups also ask for a good
• Follower effect : you want to have something just because someone else has it
Types of goods according to consumer preferences

Goods can also be differentiated according to whether a customer has different preferences (preferences) for different makes of a good class. If so, one speaks of heterogeneous goods , if not of homogeneous goods .

The different preferences can be based on objective product differences (size, purpose, quality, etc.) as well as on subjective product differences (e.g. brand image). Typical examples are electricity (for homogeneous goods) and cars (for heterogeneous goods).

Homogeneous goods are completely interchangeable with one another. There are neither objective differences (i.e. the goods are material, similar in terms of their purpose, place of purchase, etc.) nor subjective differences (i.e. consumers have no preferences for certain suppliers either). If the goods are homogeneous, the price alone determines the purchase decision .

The homogeneity of goods is a necessary prerequisite for the perfect market . Examples of homogeneous goods are call-by-call telephone tariffs, electrical energy , shares in the same company. Banknotes of the same currency and fuel are largely homogeneous in nature , as long as they have not been made heterogeneous by additives and / or advertising.

However, if goods have different properties, they can no longer be arbitrarily exchanged. This reduces the competition between the providers. Material goods are generally not homogeneous because their procurement depends on the location and is associated with different buying experiences. A typical example of heterogeneous goods are cars that differ in quality, equipment, brand image, etc.

### According to the type of information asymmetry

The theory of information economics differentiates between supplier and customer according to the type of information asymmetry. If the supplier of a good has more information about the good than the demander, there is information asymmetry.

1. Search goods (search goods): the goods can be checked before they are purchased, e.g. B. Book, DVD, so that the information asymmetry is low.
2. Experience goods: the quality of the goods can only be determined after the contract has been concluded, e.g. B. a visit to the hairdresser. Medium information asymmetry.
3. Credence goods: the quality depends on stochastic factors; the information costs about the quality of the supplier for the customer are very high, z. B. medical care, investment advice. Trust in quality usually has to replace the search for information, which leads to a high level of information asymmetry.

### If possible, transportation

There are tradable ( English trade ables ) and non-tradable goods ( English non-trade ables ), whereby non-tradable goods due to high transaction costs (such as transport costs ) or other reasons are not internationally traded. Examples of non-tradable goods are services and real estate .

The differentiation of goods according to their tradability plays a role particularly in the context of foreign trade theory and other economic theoretical concepts. For example, the Balassa-Samuelson effect explains international price and inflation differences with the existence of non-tradable goods.

Movables and real estate

In economic terms, goods that can be moved (transported) are called movables . Property that is immovable is called real estate . This means that the economic term “real estate” is to be understood more broadly than that used in general language. In economic terms, this includes not only buildings or land , but also roads and power lines .

### According to welfare effects

A merit good is a good that is not in sufficient demand from a social point of view. Similarly, a demeritic good is a good that is in too much demand from a social point of view. There are various reasons for this “wrong” demand behavior for both types of goods: irrational decisions, incomplete information, wrong time preference rates and external effects.

Goods and services whose benefits are negative are economically referred to as "bad" (sometimes also "bad", "burden" or "evil"; English bad ). They are characterized by the fact that the consumer (contrary to a "good") wants as little of them as possible ; the benefit decreases (instead of increasing) with increasing quantity. Classic examples of this are garbage or pollutants: You are willing to spend money to avoid this "bad thing" because it creates a negative benefit. Within the production theory, bad goods are divided into reductions, if they are destroyed during "production" (in this case a reduction) (e.g. in garbage in a garbage incineration plant), and into waste products, if they are generated in the process (waste water, exhaust gases Etc.). Their generation is modeled with negative profits or contribution margins and their procurement with negative costs.

## literature

• Manfred Weber: On the doctrine of the economic property , Duncker & Humblot; Edition: 1 (1969), ISBN 3-428-02250-5

• Economic good - definition in the Gabler economic dictionary
• free good - definition in the Gabler Wirtschaftslexikon
• scarce good - definition in the Gabler economic dictionary

## Individual evidence

1. ^ A b Fred G. Becker: Introduction to Business Administration , Springer Berlin Heidelberg; Edition: 1 (March 16, 2006), ISBN 3-540-28213-0 , p. 2.
2. ^ Scarce good - definition in the Gabler Wirtschaftslexikon.
3. a b Armin Töpfer: Business Administration: Application and Process Oriented Basics , Springer Berlin Heidelberg; Edition: 2nd, revised. Edition (May 7, 2007), ISBN 3-540-49394-8 , p. 86.
4. a b c Arthur Woll: General Economics . Vahlen Franz GmbH; Edition: 12th, 1996, ISBN 3-8006-2973-9 , p. 50 f.
5. ^ Franz Xaver Bea / Marcell Schweitzer: General Business Administration 1 Basics , UTB, Stuttgart; Edition: 10th, revised. and exp. Edition (October 28, 2009), ISBN 3-8252-1081-2 , p. 21
6. ^ Günter Wöhe / Ulrich Döring : Introduction to General Business Administration , Vahlen; Edition: 24th, revised and updated edition. (September 13, 2010), ISBN 3-8006-3795-2 , p. 1.
7. Edwin of Böventer, Gerhard Illing: Introduction to Microeconomics , Oldenbourg; Edition: edited edition (May 14, 1997), ISBN 3-486-24248-2 , p. 6 f.
8. ^ Wolfgang Weber / Rüdiger Kabst: Introduction to Business Administration , Gabler; Edition: 6th A. (September 2008), ISBN 3-409-63011-2 , p. 1/2
9. ^ Fred G. Becker: Introduction to Business Administration , Springer Berlin Heidelberg; Edition: 1 (March 16, 2006), ISBN 3-540-28213-0 , p. 2.
10. Egon Görgens / Karlheinz Ruckriegel / Franz Seitz, European Monetary Policy: Theory - Empiricism - Practice , 2008, p. 460
11. Thomas Diefenbach: Criticism and new conception of general business administration on a social science basis . 1st edition. Springer-Verlag , 2003, ISBN 978-3-322-81094-6 . P. 261
12. ^ William Boyes, Michael Melvin: Economics . South-Western Cengage Learning, 2016, ISBN 978-1-111-82613-0 (American English). P. 4 ff.
13. Hal Varian: Fundamentals of Microeconomics . 8th edition. Oldenbourg Wissenschaftsverlag , Munich 2013, ISBN 3-486-70453-2 (American English, original title: Intermediate Microeconomics .). P. 43 ff.
14. Harald Dyckhoff: Production Theory - Basics of Industrial Production Management , Springer, Berlin, 5th Edition, 2006, pp. 123, 128, 195.