Unit 2 - Economic Essentials

Learning Target 2: I can distinguish between economic goods and services

Economics goods and services are items the customer / consumer find useful and benefit society but are scarce in relation to its demand so that there is effort by the customer to obtain it.  It is important to note there items labeled as free goods such as air and sea water where there is an abundant supply and no need for conscious effort to obtain them.  Economic goods will usually have a value placed on them which means there is a price that represents what people are willing to pay for them while free goods do not since there is no point in trading free goods due to the lack of scarcity for those items. 

 

If we look a little closer at the differences between goods and services you will see there are 5 major differences.  For these 5 difference we will use soda (good) and your favorite restaurant (service) for our comparison.  While a restaurant does have actual products they do sell we will be focusing on the service the restaurant provides and not the actual tangible product of food. 

 

The first difference is the goods are tangible and services are intangible.  You can touch a can of soda but you cannot physically touch the service the cook provides you by making your dinner at a restaurant. 

 

Next a service will require some interaction with the customer.  If you buy a soda you may never interact with a person from that soda company.  When you go out to dinner you will interact with multiple people such as the host, the server, the manager, the cashier, etc…

 

Moving on, if you purchase a soda it will more than likely be packaged the same and taste the same every time you purchase it.  This cannot be said for services.  Services will vary each day because the attitudes of the customers and the individuals performing the services will vary as well.  This will make it very difficult for restaurants to provide the exact same service to you each and every time you go out to dinner.  On the flip side, it is very easy for the soda company to produce a quality product every time you are thirsty. 

 

Finally services differ from goods because they are perishable and time dependent.    Services cannot be stored like goods can.  When you go out to dinner your value of the service provided can best be described as spontaneous consumption.  When you leave the restaurant it was either good service or bad service.  You cannot press pause halfway through the meal and say I would like to continue this service tomorrow at lunch.  You can however drink half of your can of soda today and finish it tomorrow for lunch. 

 

One final note about goods and services, a great product can be valued by the customer as an average product because of the service provided and an average product can become an amazing product because the service provided.  A business must remember the reason they are in business is because of the customer thus think of themselves as a service business even if they predominately only sell goods. 

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