Classification of Goods and Services

Goods and Services

Goods are tangible in nature i.e. they can be seen and touched.

There is a time gap between production and consumption of goods as they are produced first and consumed later.

They can be stored and utilized when required.

They can be transferred from one place to another.



Services are non-tangible in nature i.e. they can neither be seen nor be touched.

There is no time gap between the production and consumption of services.

That is why they are produced and consumed simultaneously.

Services cannot be stored.

Transfer of service is not possible.


 Classification of Goods and Services

[1] Free goods and economic goods.

[2] Free services and economic services.

[3] Consumer goods and producer goods.

[4] Consumer services and producer services.

[5] Single use goods and durable use goods.

[6] Private goods and public goods.


[1] Free goods and economic goods

Free goods are free gifts of nature.

They are available in abundance i.e. in unlimited quantity and the supply is much more than the demand.

You don’t have to pay anything to get them. That is why they are called free goods.

In our daily life, we use toothpaste, soap, shaving cream, footwear, bread etc. These goods are manmade and their supply is not unlimited.

We use water for various purposes at home, sand for construction and different minerals in different forms. Now these are not manmade but free gifts of nature.

But because they are scarce i.e. their demand is more than their supply, they command a price and are not freely available.

They are the economic goods.

Economic goods are those goods (manmade or free gifts of nature) whose demand is more than supply.

They command a price and they can be bought in the market.


[2] Free services and economic services

In case of services too, there are free services and economic services.

Free services are those, which cannot be bought in the market and which are rendered due to love, affection etc.

For example services of parents for their children.

All those services, which can be bought in the market, are economic services such as services of doctors, engineers etc.

The rest of the classification of goods and services deal only with economic goods and services.


[3] Consumer goods and Producer goods

This classification is based on the purpose for which a particular good is used.

Consumer goods are those goods, which satisfy the want of consumer directly.

They are goods, which are used for consumption.

For example bread, fruits, milk, clothes etc.


Producer goods are those goods, which satisfy the want of consumers indirectly.

As they help in producing other goods, they are known as producer goods.

For example machinery, tools, raw materials, seeds, manure and tractor etc are all example of producer goods.


[3a] Intermediate goods

Raw materials, power, fuels etc. used by the producers for further production of final goods and services are also called intermediate goods.

Example: Wheat flour is an intermediate good in the production of bread in the bakery.


[4] Consumer’s services and producer’s services

When the consumers or the households directly use services, they are known as consumer services.

For example services of a tailor stitching your shirt or services of a doctor giving you the treatment or services of a plumber are repairing your leaking tap, etc.

Producer services on the other hand are used to produce other goods and services, which are in turn demanded by the consumers.

In other words producer services satisfy the human wants indirectly.

For example a tailor stitches a shirt for a readymade garment shop, an electrician repairs fault in the electric supply in a production unit or even a truck transporting raw material to a factory.


[5] Single use and durable use goods

Single use goods are those goods, which can be used only once.

They are finished only in one use.

For example bread, butter, egg, milk etc. are the single use consumer goods as they are consumed immediately and once for all.

Similarly single use producer goods are exhausted in one production process.


Durable use goods are those goods, which can be used again and again for a long period of time.

There are durable use consumer goods as well as durable use producer goods.

Durable use consumer goods are cloth, furniture, television, scooter etc. that can be used by consumer again and again.

Durable use producer goods are used in production again and again for example, machines, tools, tractors etc. this does not mean that repeated use of these goods does not make any difference to them.

In fact the value of these goods gets depreciated after continuous use.


[6] Private goods and public goods

All goods that are privately owned and are exclusively enjoyed by individuals are called private goods.

For example all the goods owned by you are private goods.

This includes your watch, pen, scooter, books, table, chair, bed, clothes etc.

If you own a factory then its building, machinery; tools etc are your private goods.


Public goods are those goods, which are owned and enjoyed by the society as a whole.

For example roads, bridges, park, town hall etc. are all collectively owned.

They are available to all people in a society without any discrimination, i.e. no one is denied from the consumption of public goods.

Both government and private entrepreneurs may produce public goods.