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A good in economics is any object or service that, upon consumption, increases utility, and therefore can be sold at a price in a market.
If an object or service is sold for a positive price, then it is most likely a good since the purchaser considers the utility of the object or service more valuable than the money. Some objects are very rarely traded, such as air: it can be difficult to determine if such an object is a good or not.
In macroeconomics and accounting, a good is contrasted with a service. A good here is defined as a physical product capable of being delivered to a purchaser and involves the transfer of ownership from seller to customer, as opposed to an intangible service. In microeconomics this distinction is rarely made.
Utility characteristics of goods
A good is an object whose consumption increases the utility of the consumer. Goods are usually modeled as having decreasing marginal utility. The first car an individual purchases is very valuable; the fourth is much less useful. Thus, in these and similar goods, the marginal utility of additional units approaches zero as the quantity consumed increases. Assuming that one cannot re-sell it, there is a point at which a consumer would decline to purchase an additional car, even at a price very near zero. This is the consumer's satiation point.
In some cases, such as the above example of a car, the lower limit of utility as quantity increases is zero. In other goods, the utility of a good can cross zero, changing from positive to negative through time. This means that what initially is a good can become a bad if too much of it is consumed. For example, shots of vodka can have positive utility, but at some point for all consumers, additional units make the consumer less happy and can be injurious to the consumer's health.
In economics a bad is the opposite of a good. Ultimately, whether an object is a good or a bad depends on each individual consumer, and therefore, it is important to realize that not all goods are good all the time, and not all goods are goods to all people.
Types of goods
Goods can be defined in a variety of ways, depending on a number a characteristics, these are listed in the table below;
See also
References
- Bannock, Graham et al. Dictionary of Economics, Penguin Books, 1997.
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"Good (economics and accounting)"