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Goods and Services: Meaning and Classification of Goods and Services



We desire to have all the things to satisfy our present and future wants. Thus, our desire is for all those things that satisfy our wants.

All these things are either material goods or services. If something is not wanted by anybody it will not be called a good or service.


A head of dirt will not be called as it is not wanted by any human being. Thus all the goods have the ability to satisfy some of our wants. Likewise, all services have the ability to satisfy some of our wants.

Therefore, we can divide the things that we wants into two categories:

(i) Goods and

(ii) Services.


Goods are material things wanted by human beings. They can be seen or touched. Services are non-material things. These cannot be seen or touched only their effects are felt. When we are hungry, we take food. When we fall sick, we take medicines. When we study, we use book, notebook, pen, paper etc. All these are examples of goods which satisfy some of our wants. All the things which satisfy human wants are good.

However, wants for haircut, washing of cloths, mending of shoes, stitching of cloths, studying in a school or a college etc. are not satisfied by goods. These are satisfied by the services performed by a barber, washer man, cobbler, tailor and teacher etc. So some of our wants are satisfied by goods and some by services. Hence, all the human wants can be satisfied by goods and services.

Classification of Goods and Services:

Goods and services are of many types. However, these can be classified into some broad groups.


These are discussed below:

(i) Free Goods and Economic goods:

The goods which have unlimited supply and are provided as free gift of nature. The goods which are not man-made and do not have to pay anything to get them. These goods are known as ‘Free Goods’. For example, air, sea, water, sunlight, sand in the desert etc. On the other hand, goods like vegetables, grains, minerals, fruits, fishes etc. which are neither man-made nor unlimited supply of nature are known as ‘Economic Goods’ All these goods are sold and purchased in the market only.

(ii) Free Services and Economic Services:

Services which cannot be bought in the market and which are only rendered out of love, affection etc. are known as ‘Free Services’. For example, all services given by the parents to their children are free services. However, all the services that can be bought in the market are ‘Economic Services’. Services rendered by doctors, teachers, lawyers, barbers, cobblers etc. are the example of economic services.

(iii) Consumer Goods and Capital Goods:

The goods which are directly used by the consumer for the purposes of consumption are known as ‘Consumer Goods’ The example of consumer goods are bread, biscuit, butter, jam, rice, fish, egg, shoes, shirts, fan, book, pen, cooking gas etc. On the other hand, all the goods which are not directly used to satisfy consumption but which are used in further production are called ‘Producer Goods’ or ‘Capital Goods’. The examples are seeds, fertilizers, tools, machines, raw materials etc.

(iv) Consumer Services and Producer Services:

When services are used directly by consumers to satisfy their wants, they are called consumer services. When services are used by producers to produce other goods and services, they are called producer services. When the tailor stitches our shirt, it is a consumer service However when the tailor stitches a shirt for a readymade garments shop, the service rendered by him is a producer service.


(v) Single Use and Durable Use Goods:

Goods (both consumer goods and producer goods) which are only used or consumed for single time or only once are known as single use goods. Bread, milk, fruits, vegetables etc. are the example of single use consumer goods. On the other hand, seeds, fertilizers, raw materials etc. are the example of single use producer goods.

Some goods (both consumer goods and producer goods) can be used for a considerable period, that is, they can be used again and again. They are called durable use goods. For example, table, chair, cloths, shoes etc. are the durable use consumer goods. On the other hand, tube wells, tractors, pump-sets etc. are the example of durable use producer goods,

(vi) Private Goods and Public Goods:


On the basics of ownership goods can be classified into two groups. All the goods which are owned by private bodies are called private goods. For example, a car, a house, a motor­bike, a mobile phone, books, a television set etc. are the private goods.

There are large number of goods which are collectively owned by the society, the public or the government. These are called public or government goods. For example, roads, bridges, hospitals, government schools etc. are the public goods or the social goods or the government goods.

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