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Goods vs. Services

Jacob Meiners, Allison Tanner
  • Author
    Jacob Meiners

    Jacob Mainers has taught university humanities for over three years. They have a master’s degree in history from Princeton University.

  • Instructor
    Allison Tanner

    Allison has a Masters of Arts in Political Science. She has worked in the customer service and food industry since 2013.

Learn what constitutes goods and services in economics. Understand the differences between and learn to distinguish goods and services and see examples of each. Updated: 05/16/2022

What are Goods and Services?

Goods and services have a great impact on the economic system. Goods refer to tangible items that can be used, stored, evaluated, taken home, or consumed. They vary from appliances and clothing to automobiles. On the other hand, in economics services are intangible properties where the service receiver does not obtain anything tangible or ownership. Examples of services are consultation services, copyright fees, and labor needed to install, modify and configure a computer program. For instance, people go to an optician because they need to change eyeglass frames. The optician's role is to help a person decide on replacement frames to buy and conduct the relevant measurements of the face and eyes. In this case, the good is the frame, and the measuring and changing of the frames is the service.

Goods constitute two categories: durable goods and consumer goods. Durable goods last a relatively long time and are not depleted when used. Examples of durable goods are machinery and tools. Consumer goods are those that are bought primarily for the purchaser's use, such as milk and bread. Social services, business services, and personal services constitute services. Social services are services that non-governmental organizations conduct to reach a particular set of social goals. Business services refer to services that support another business but do not produce any tangible product. This could be transportation, banking, and insurance. Lastly, personal services are services where each consumer has different needs. Examples of these services are restaurants and tourism.

Goods and services are characterized based on the three main factors below:

  • Tangibility: Tangible products are physical assets that can be owned, touched, and transferred. A good is a tangible asset. In contrast, services are characterized by their intangibility. Services do not physically exist but hold monetary value because they represent potential revenue. The tangible nature of the goods is an essential element, especially when influencing customers to purchase the goods because the consumers can smell, touch, hear, or taste them before they buy. In service, what matters is the professional excellence of the seller and the decision-maker. The seller can only emphasize the satisfaction and benefit that a buyer can gain when buying the product. For instance, banks promote the sale of credit cards by helping customers visualize the comfort and the convenience the holders will gain from having the credit card.
  • Perishability: Perishability is the ability to be saved, stored, resold, or returned once purchased. Goods can be stored and saved but services cannot. The primary importance of perishability is that manufacturers can manufacture at will to meet the demand for goods. This is a disadvantage for services because they cannot be manufactured to meet demand.
  • Ownership: Ownership is the transfer of a good from a seller to a buyer. Conversely, services are non-transferable. Even though the marketing strategies for goods and services are different, ownership is essential, especially for goods. Tangible goods are easier to market because they can be touched, demonstrated, and displayed. For services, since they are intangible, the strategy required involves forming good relationships and developing trust with the consumers. Goods can be transferred from one place to another, meaning ownership can also be transferred from a seller to a buyer. This provides an opportunity for a buyer to resell. In service, only the buyer has access to the service.

Both goods and services have value and should be sold at a specific and convenient price. The goods and services market is where consumers pay money to acquire a particular good or service. The process is carried out by simply going to the store, trading with a friend, or shopping on the internet.

Goods vs. Services

Mary and Annie are in need of functional computers in order to use them for their college classes.

Mary is looking to buy a new computer. She is looking to select the best option among all of the 'goods.' Goods are tangible products that consumers buy to meet their needs. Mary's new computer is a good because it is a product she will purchase and take home.

On the other hand, Annie is looking to have the screen of her current computer repaired. The repair is known as a service because Annie will not be purchasing a product. Instead, Annie is looking to pay for a skill, known as a service, which can help her to meet her needs.

Goods and services are two different but important components of a person's everyday life. In business, we can distinguish a good from a service using a few simple steps.

Knowing a Good from a Service

Identifying a good from a service can be easy if you use a few simple tricks!

Goods and services differ in areas such as:

  • Tangibility
  • Ownership
  • Ability to Return
  • Measurement of Quality

Using Mary and Annie's computer needs, let's evaluate the differences between a good and a service.

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Goods vs. Services

Goods and services play a massive part in a country's economy since they both exist to meet consumers' demand, but what is the difference between goods and services? Four areas can help differentiate whether something is a good or service: tangibility, whether something can be owned, ability to return, and if the quality can be measured. Below is a detailed explanation of the differences between goods and services:

Tangibility

Tangible means something can be seen, touched, or felt. Tangible assets have a physical existence. Goods are tangible assets since they have physical existence and physical property. Examples of goods are equipment, buildings, and plants. An intangible asset does not have a physical existence, meaning it cannot be seen, touched, or felt. Examples of intangible assets are trademarks, brands, copyrights, and goodwill.

Ownership

Another critical aspect of goods pertains to ownership. Ownership is the transfer of goods from a seller to a buyer after a buyer has made a transaction. The fact that a good is tangible makes ownership transferable. Once a good has been purchased it can be easily separated from the seller, and the consumer can take it home for personal use. In contrast, a service is not tangible making it impossible to own.

Ability to Return

Because goods are tangible, a buyer can exchange or return goods depending on a company's policies. However, it is impossible to return a service since it belongs to the service provider. If a consumer is unsatisfied with a service, the provider may correct the error, schedule an amendment service, or issue a refund, but the provider cannot process a return on the service or time the provider spent doing the service.

Tangibility

A good is known for being tangible. This means that it is something physical you can actually touch and take home. Mary's new computer is a good because she will actually take a physical item home. However, a service is intangible because it isn't something that can be touched or stored. For example, Annie needs a repair service for her computer. Although the repair will restore the use of her computer, Annie isn't purchasing a physical product.

Ownership

When someone buys a good, they obtain ownership over the item. Mary will own her new computer. On the other hand, when someone buys a service, they don't gain ownership of that service. Annie will not buy the repair person, but she is buying their services. In the end, the repair person will maintain ownership of the service.

Ability to Return

Ownership influences return.

Consider that because Annie will not own the service, she cannot 'return' the repair service. She could request more work to be completed, but she is not able to give back the time spent on the repair. On the other hand, Mary has the option of returning her computer if she decides it doesn't fit her needs.

So, you can return a good, but you can't return a service.

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Video Transcript

Goods vs. Services

Mary and Annie are in need of functional computers in order to use them for their college classes.

Mary is looking to buy a new computer. She is looking to select the best option among all of the 'goods.' Goods are tangible products that consumers buy to meet their needs. Mary's new computer is a good because it is a product she will purchase and take home.

On the other hand, Annie is looking to have the screen of her current computer repaired. The repair is known as a service because Annie will not be purchasing a product. Instead, Annie is looking to pay for a skill, known as a service, which can help her to meet her needs.

Goods and services are two different but important components of a person's everyday life. In business, we can distinguish a good from a service using a few simple steps.

Knowing a Good from a Service

Identifying a good from a service can be easy if you use a few simple tricks!

Goods and services differ in areas such as:

  • Tangibility
  • Ownership
  • Ability to Return
  • Measurement of Quality

Using Mary and Annie's computer needs, let's evaluate the differences between a good and a service.

Tangibility

A good is known for being tangible. This means that it is something physical you can actually touch and take home. Mary's new computer is a good because she will actually take a physical item home. However, a service is intangible because it isn't something that can be touched or stored. For example, Annie needs a repair service for her computer. Although the repair will restore the use of her computer, Annie isn't purchasing a physical product.

Ownership

When someone buys a good, they obtain ownership over the item. Mary will own her new computer. On the other hand, when someone buys a service, they don't gain ownership of that service. Annie will not buy the repair person, but she is buying their services. In the end, the repair person will maintain ownership of the service.

Ability to Return

Ownership influences return.

Consider that because Annie will not own the service, she cannot 'return' the repair service. She could request more work to be completed, but she is not able to give back the time spent on the repair. On the other hand, Mary has the option of returning her computer if she decides it doesn't fit her needs.

So, you can return a good, but you can't return a service.

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Frequently Asked Questions

What are examples of goods and services?

Some examples of goods are computers, furniture, phones, bag, and apples. Examples of services are therapy sessions, babysitting, surgery, house cleaning, haircuts, and legal advice.

What is the major difference between goods and services?

The main difference between goods and services is tangibility. Goods are tangible which means one can see and touch goods. Services are intangible which means they have no physical presence.

What are some examples of goods?

Goods include books, shops, washing machines, cars, wood, coffee, handbags, beds, chairs, mirrors, computers, tractors, bottles, clothes, blenders, lotions, toothbrushes, and houses.

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