Difference between Goods and Services

What Are Goods?

Goods are items that satisfy human wants and provide utility. Goods are products i.e. things that we make or grow and aim to sell. For example, we can exchange money for goods and services.

In economics, goods are items that satisfy human wants and provide utility, for example, to a consumer making a purchase of a satisfying product.

A common distinction is made between goods that are transferable and services that are not transferable.

Consumption Goods or Consumer Goods

Consumption goods are those goods that are directly used for the satisfaction of human wants. These are not used in the production of other goods.

Example: Ice cream and milk used by the households. Consumption goods are meant for final consumption and as final goods, these are ready for use by their final users.

Consumption goods are broadly classified into four categories :

  1. Durable Goods:  Durable consumer goods are those goods that can be used for several years and are of relatively high value. These goods are repeatedly used before being discarded as useless. Example: TV, radio, Car, Scooter, washing machine.
  2. Semi-durable Consumption Goods: Semi-durable consumer goods are those goods that can be used for a period of one year or slightly more. These are not of very high value. Example: Clothes, furniture, crockery, etc.
  3. Non-durable or Single-use Consumption Goods: Non-durable or single-use consumption goods are those goods that are used up in a single act of consumption. Example:  The bread that you eat is used up in a single act of consumption.
  4. Services: Services are those non-material goods that directly satisfy human wants. For Example, Services of a doctor, lawyer, domestic servant, etc.

Capital Goods

Capital goods are fixed assets of the producers. These goods like plants and machinery are repeatedly used in the process of production for several years.

Even nuts and bolts are used for several years, but these are not capital goods. Because these are of low value. In contrast, capital goods are of high value.

Thus only those fixed assets of the producers are taken as capital goods that are used in the process of production for several years and which are of high value.

Example: Plant and machinery

Final Goods

These are those goods that have crossed the boundary line of production and are ready for use by their final users. These are consumers and producers.

Accordingly, final goods ate often classified as final consumer goods and final producer goods.

Final consumer goods: goods that are ready for use by their final users, and consumers are their final users.

Example: Bread and butter as used by the consumers.

Final producers goods: goods that are ready for use by their final users, and producers are their final users. 

Example: Tractors and harvesters as used by the farmers.

Intermediate Goods

Intermediate goods are those goods that have yet not crossed the boundary line of production and value is still to be added to these goods, which are yet not ready for use by their final users.

Example: Shirts purchased by firm X from firm Y for resale are intermediate goods because the value is to be added to the shirts through resale.


A service is any activity or benefit that one party can offer to another which is essentially intangible and does not result in the ownership of anything.

Services are the major component and somehow influenced by the service motives of any business. The service is much needful to develop and make safeguards of customers interest.

Example: Services businesses include companies engaged in transport, food service, distribution, retail, and other industries that sell services rather than products.

Characteristics of Services

1. Intangible

Services are intangible, i.e., these cannot be seen or touched.

We can only feel services or one can only experience them.

We cannot find out the quality of service before taking it.

One can find out the quality only after experiencing it.

So suppliers must try to offer good quality services to customers so that they demand them again after experiencing them.

2. Lack of Homogeneity or Inconsistency

Services have to be performed each time according to the demands and expectations of each customer. Some services may be provided differently by different service providers.

For example, the banking services provided by nationalized banks are quite different from the banking services provided by the private sector or foreign banks.

3. Inventory

The main feature of services is that services are consumed at the same time when they are produced. So there is no need to maintain inventory or stock of services.

If service is not consumed immediately then it is a total loss, for example, a vacant seat in a cinema hall.

4. Non-transferability or Inseparability

The services cannot be separated from the provider of services. These are produced and consumed at the same place only.

For example, we cannot separate the medical service provided by a doctor from the doctor. The doctor and his services are inseparable.

5. Customer’s Participation or Involvement

To experience service the participation of the customer is essential. For example, telephone companies provide telephone services but to use this service customer has to make or receive the call.

Difference between Goods and Services

  1. Goods are tangible whereas Services are intangible.
  2. In goods, Inventory must be maintained whereas No requirement to maintain inventory in Services.
  3. Goods can be separated from providers whereas Services can’t be separated from providers.
  4. Goods can be Standardised whereas it is difficult to standardize and maintain quality in Services.
  5. In Goods Ownership can be transferred whereas in Services Ownership cannot be transferred.
  6. In Goods, it is a physical object, e.g., car, TV, etc. Whereas in Services it is an activity or process e.g., watching a movie.

Classification of Services

  1. Business Services
  2. Social Services
  3. Personal Services

1. Business Services

Business services are those services which are used by business enterprise to carry on business activities more smoothly, for example, banking, insurance, transportation, etc.

2. Social Services

Social services are carried voluntarily to achieve social goal or to uplift the society at large. These social services may improve standard of living of weaker services of society to provide health care, Improve sanitation in slum etc.

3. Personal Services

Personal services are experienced differently by different customers. These differ according to service provider.e.g., tourism, restaurants, etc

Leave a Reply 0

Your email address will not be published. Required fields are marked *