In economics, merchandise or possessions that are used to satisfy human wants and provide utility, are known as goods. Everything from a needle to a hi-tech machinery is an example of a good, however each good has its purpose. Different goods serving distinct purposes are categorized into different types. Each with its own merits. The types of goods which I will be discussing in this blog are: public/private goods, demerit/merit goods and inferior/normal goods.
Public goods:
A public good is an item consumed by society as a whole, because public goods are consumed without reducing the availability of the good to others, and cannot be withheld from people who do not directly pay for them, these characteristics of public goods are called non-excludability, non-rivalry. Law enforcement is also an example of a public good, that is, all people within a society can benefit from its use without reducing its availability for other. Public goods are financed by tax revenues.
Demerit/Merit Goods:
A demerit good is defined as a good which can have negative impact on the consumer, and these damaging effects may be unknown to or disregarded by the consumer. Demerit goods also usually have negative externalities, that is, consumption causes a harmful effect to a third party. Examples of demerit goods include alcohol, cigarettes, drugs.
Merit goods are those goods and services that the government feels that people will under-consume, and so these goods should be subsidized or provided free at some point of use because these good have high benefits and low or no costs to society. The examples include healthcare and education.
Inferior/Normal Goods:
An inferior good is a good whose consumption falls as the consumer’s income increases. An example, of an inferior good is a used Cell phone. If a person initially has a low income and he cannot afford to buy a new phone, so he would have to buy a used phone, however if his income increases, the same person would more likely buy a new phone rather than a used phone. The opposite of an Inferior Good is a normal good, whose consumption stays constant no matter what the income level is. This is a good with no close substitutes.
