Goods and Services

A business can be defined as an organization that provides goods and services to others who
want or need them. 

Goods are tangible things that are produced, bought or sold, then finally consumed. Services are
activities that other people or businesses do for you. Services are sometimes referred to as
intangible, in the sense that you can’t touch or handle them.

Most businesses provide a service rather than make goods.  That is particularly true of the small
business sector. Take a flick through the Yellow Pages directory at home to see just how many
small services businesses operate in your locality. These are some important differences in the
skills required to run a business making goods compared with services. Here is a brief
description:

GOODS
Goods requires a production location factory The output from production is stock – which can
be transported and/or stored for future sale Production costs will include the costs or raw
materials and other inputs into the production process Requires close liaison with suppliers.
Quality can built-in to the product through good design and production processes designed to
ensure the right quality is achieved. The production process needs to be in place and working
before goods can be produced.

SERVICES
Services on the other hand are output of individuals and they can be a collective or
individualistic action or performance by an individual. For example a barber or a chartered
accountant is giving individual services. Airlines on the other hand have airplanes which are a
product but travelling by airplanes is a service (airlines are one of the most competitive service
sectors today). The location is where the service is provided – either physically (e.g. a builder) or
virtually (e.g. telesales or via a website) Service is delivered at a point in time. It cannot be
stored. A shop has to be open to sell.  A hairdresser has to be there to cut hair. The main cost of a
service business is the people involved. Services require high levels of customer satisfaction
Quality is measured by the quality of customer service.  Harder to manage and relatively easy to
start a service business, particularly using franchises, where a business format has already been
established.

Economic Goods

An economic good is a good or service that has a benefit (utility) to society. Also economic
goods have a degree of scarcity and therefore an opportunity cost. This is in contrast to a free
good (like air, sea water) where there is no opportunity cost – but abundance. Free goods cannot
be traded because nobody living by the sea would buy seawater – there is no point.

However with economic goods where there is some scarcity and value, people will be willing to
pay for them.

Another feature of an economic good is that if it can have a value placed on the good, it can be
traded in the market place and valued using a form of money.

An economic good will have some degree of scarcity in relation to demand. It is the scarcity that
creates a value people become willing to pay for. It is the scarcity which creates opportunity cost.
– For example, if we pick apples from a tree, it means that other people will not be able to enjoy
them. If we devote resources to mining gold, the opportunity cost is that we can’t devote this
time and effort to growing corn.

Non-Economic Goods

There is much debate over the value of goods such as food, shelter and health care. While these
are economic goods, many argue that necessities for basic survival should be free. Endangered
plant and animal species are also debatable resources. Endangered plant species with medicinal
benefits are economic goods since they are beneficial to humans. Many endangered animal
species, on the other hand, may be considered non-economic goods if they have little or no value
to humans.

Public Goods

In economics, a public good is a good that is both non-excludable and non-rivalrous in that
individuals cannot be effectively excluded from use and where use by one individual does not
reduce availability to others. Gravelle and Rees: "The defining characteristic of a public good is
that consumption of it by one individual does not actually or potentially reduce the amount
available to be consumed by another individual." In a non-economic sense, the term is often used
to describe something that is useful for the public generally, such as education and infrastructure,
although these are not "public goods" in the economic sense. This is in contrast to a common
good which is non-excludable but is rivalrous to a certain degree.

Public goods include fresh air, knowledge, official statistics, national security, common
language(s), flood control systems, lighthouses, and street lighting. Public goods that are
available everywhere are sometimes referred to as global public goods.[2] There is an important
conceptual difference between the sense of 'a' public good, or public 'goods' in economics, and
the more generalized idea of 'the public good' (or common good, or public interest),[3][4]"‘the’
public good is a shorthand signal for shared benefit at a societal level [this]
(philosophical/political) sense should not be reduced to the established specific (economic) sense
of ‘a’ public good."[5]

Many public goods may at times be subject to excessive use resulting in negative externalities
affecting all users; for example air pollution and traffic congestion. Public goods problems are
often closely related to the "free-rider" problem, in which people not paying for the good may
continue to access it. Thus, the good may be under-produced, overused or degraded.[6] Public
goods may also become subject to restrictions on access and may then be considered to be club
goods or private goods; exclusion mechanisms include copyright, patents, congestion pricing,
and pay television.

There is a good deal of debate and literature on how to measure the significance of public goods
problems in an economy, and to identify the best remedies.Public goods include fresh
air, knowledge, official statistics, national security, common language(s), flood control
systems, lighthouses, and street lighting. Public goods that are available everywhere are
sometimes referred to as global public goods.[2]There is an important conceptual difference
between the sense of 'a' public good, or public 'goods' in economics, and the more generalized
idea of 'the public good' (or common good, or public interest),[3][4]"‘the’ public good is a
shorthand signal for shared benefit at a societal level [this] (philosophical/political) sense should
not be reduced to the established specific (economic) sense of ‘a’ public good."[5]
Many public goods may at times be subject to excessive use resulting in negative
externalities affecting all users; for example air pollution and traffic congestion. Public goods
problems are often closely related to the "free-rider" problem, in which people not paying for the
good may continue to access it. Thus, the good may be under-produced, overused or degraded.
[6]
 Public goods may also become subject to restrictions on access and may then be considered to
be club goods or private goods; exclusion mechanisms include copyright, patents, congestion
pricing, and pay television.
There is a good deal of debate and literature on how to measure the significance of public goods
problems in an economy, and to identify the best remedies.