Goods and Services: Distinction between Goods and Services (For CBSE, ICSE, IAS, NET, NRA 2022)

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Human wants are satisfied by goods and services. which are carried through various economic activities.

Goods and Services

Goods are items that are usually (but not always) tangible, such as pens, salt, apples, and hats. Services are activities provided by other people for different jobs For example we require a hairdresser to cut our hair, a doctor to cure us, a tailor to stitch our clothes, a cobbler for mending our shoes etc.

Distinction between Goods and Services

we know that both goods and services are important to satisfy human wants The main points of distinction are:


  • Goods are tangible in nature i.e.. they can be seen and touched.
  • There is a time gap between production and consumption of goods as they are produced first and consumed later.
  • They can be stored and utilized when required.
  • They can be transferred from one place to another

For Example: When we are hungry, we take food. When we fall sick, we take medicines. When we study, we use book, notebook, pen, paper etc. All these are examples of goods which satisfy some of our wants. All the things which satisfy human wants are good.


  • Services are non-tangible in nature i.e.. they can neither be seen nor be touched.
  • There is no time gap between the production and consumption of services. That is why they are produced and consumed simultaneously.
  • Services cannot be stored.
  • Transfer of service is not possible.

For example: wants for haircut, washing of cloths, mending of shoes, stitching of cloths, studying in a school or a college etc. are not satisfied by goods. These are satisfied by the services performed by a barber, washer man, cobbler, tailor and teacher etc.

Classification of Goods and Services

We know that different types of enterprises produce different types of goods and services. It is not possible to study them individually; therefore, to understand them properly we have to classify them in a number of broad groups. This classification helps us to understand the relative economic significance of different goods.

Classification of Goods and Services

Free Goods and Economic Goods

  • Free goods are free gifts of nature. They are available in abundance i.e.. in unlimited quantity and the supply is much more than the demand. You don՚t have to pay anything to get them. That is why they are called free goods.
  • In our daily life, we use toothpaste, soap, shaving cream, footwear, bread etc. These goods are manmade, and their supply is not unlimited. Similarly, we use machines, buses, table, chair, books, fans, television etc. They too are manmade, and their supply is not unlimited. We use water for various purposes at home, sand for construction and different minerals in different forms. Now these are not man made but free gifts of nature. But because they are scarce i.e.. their demand is more than their supply, they command a price and are not freely available. They are the economic goods.

Free Services and Economic Services

Those services , which cannot be bought in the market and which are rendered due to love, affection etc. are Free services. For example, services of parents for their children. All those services, which can be bought in the market, are economic services such as services of doctors, engineers etc.

Consumer Goods and Producer Goods

  • Consumer goods are those goods, which satisfy the want of consumer directly. They are goods, which are used for consumption. For example, bread, fruits, milk, clothes etc.
  • Producer goods are those goods, which satisfy the want of consumers indirectly. As they help in producing other goods, they are known as producer goods. For example, machinery, tools, raw materials, seeds, manure and tractor etc.

Intermediate Goods

  • Production of final goods and services are also called intermediate goods.
  • Example, Wheat flour is an intermediate good in the production of bread in the bakery

Consumer՚s Services and Producer՚s Services

  • When the consumers or the households directly use services, they are known as consumer services.
  • For example, services of a tailor stitching your shirt or services of a doctor giving you the treatment etc.
  • Producer services on the other hand are used to produce other goods and services in other words producer services satisfy the human wants indirectly.
  • For example, a tailor stitches a shirt for a readymade garment shop, an electrician repairs fault in the electric supply.

Single Use and Durable Use Goods

  • Single use goods are those goods, which can be used only once. They are finished only in one use.
  • For example, bread, butter, egg, milk etc.
  • Similarly, single use producer goods are exhausted in one production process.
  • For example, coal, raw material, seeds, manure etc.
  • Durable use goods are those goods, which can be used again and again for a long period of time. There are durable use consumer goods as well as durable use producer goods.
  • For example, cloth, furniture, television, scooter etc.
  • Durable use producer goods are used in production again and again.
  • for example, machines, tools, tractors and implements etc.

Private Goods and Public Goods

  • All goods that are privately owned and are exclusively enjoyed by individuals are called private goods.
  • For example, watch, pen, scooter, books, table, chair, bed, clothes etc.
  • Public goods are those goods, which are owned and enjoyed by the society as a whole. those goods are all collectively owned.
  • For example, roads, bridges, park, town hall etc.

Role and Significance of Goods and Services in an Economy

Goods and services have a multidimensional role to play in an economy.

Their role can be stated in relation to:

  • Human wants: human wants are unlimited, and they are also ever increasing. It means if the availability of different goods and services like clothes, shoes, furniture etc. increases, it will satisfy more human wants
  • Production: We require consumer goods and services to satisfy increasing human wants. But this increase in availability of consumer goods and services depends on the increased availability of producer goods and services. We can produce more if we have more and better machinery, raw material, tractors, seeds, manure etc.
  • Investment: Increase in the production of goods and services will also determine the level of investment. If the production of goods and services is more, it is likely that the consumption will be more, and the investment will also be more.

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