What is the difference between free goods and economic goods?

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:43

One of the basic categories of economic theory is the concept of free and economic goods. Before proceeding to the disclosure of the meaning of these terms, you need to get acquainted with the concept of "good". This word is often found in everyday life, but within the framework of the theory of economics, it has a clearer definition.

So, any utility is called a blessing. It can be a product, a service, the result of labor, some object or even a phenomenon. Its main task is to satisfy a certain human need. There are many criteria for classifying this concept, but according to the main features, all benefits are divided into tangible and intangible, future and present, short-term and long-term, economic and non-economic (which are called "free"), direct and indirect.

The concept of free goods in economic theory

Non-economic benefits are understood as such phenomena and objects that are provided to a person without any effort. They exist in nature on their own and do not require outside intervention for the process of their reproduction and production. As a rule, the volume and quantity of such benefits is unlimited, and they are distributed freely. Therefore, they are called "free", that is, receivedfree of charge.

From the point of view of the economy, the cost of such goods is zero, since society does not have to spend any resources and time to recreate them. In addition, people can spend them in any amount, and their total amount will not decrease.

Examples of free (non-economic) benefits

The simplest examples of non-economic goods are water, air, sunlight. That is, any phenomenon or object that a person can receive free of charge in any amount can be considered free.

Not all natural resources can be included in this category. For example, s alt or oil will not be examples of free goods, although they are reproduced without human participation. The main indicator of non-economic benefits will be "the gratuitousness of obtaining in any required volume." For the extraction of s alt and oil, economic resources will be spent, which will determine their future value. To receive them, a person will need to pay.

Also, the power of the wind, the seas and oceans, rains, snow in the winter season also belong to the free benefits. A person cannot live without these phenomena, but to satisfy most of his basic needs, non-free goods are needed.

The concept of economic benefits

This term is the opposite of what was said above. An economic good is such a phenomenon or object that is the result of the economic activity of an individual or society as a whole, and for himcreations always consume resources. The number of such phenomena is limited, and sometimes it can be much lower than the demand and need for this type of economic good.

For example, living space in a new building in the city center can be an example of such a blessing. The demand from the residents of the city may be higher than the available number of apartments in the building. In addition, in order to receive this living space, a person will need to pay, that is, he will not receive it for free. Even if a person receives an apartment for free (as a prize in a lottery), it still will not be considered a free good, since materials, time and efforts of workers were spent on its reproduction.

In addition, economic goods include various services and services, public institutions and any other resources that can be considered scarce.

The difference between free goods and economic goods

So what are the main differences between these two concepts? First, free goods are provided free of charge, while economic goods must be paid for. As a possible option - a person can get them for free, but they still have a cost. Secondly, no resources need to be expended to reproduce free goods. At the same time, they will always be needed to obtain economic ones. And, thirdly, non-economic benefits are presented in unlimited quantities and their distribution in society is free from any rules, while economic ones, on the contrary, are always limited.

Now that we know what distinguishes free goods from economic goods, it will be much easier to understand economic theory and all the processes related to it that take place around us every day.