COMMODITIES AND GOODS AREN’T THE SAME CONCEPT.

Classification of commodities

We often misinterpret commodities and goods as one of the same thing. But it’s not the same story in fact goods are just a type of commodity. So, today we will discuss different types of commodities on the basis of their utilities.

  • Economic goods:

They are those commodities for which there is a direct relationship between number of units consumed and total utility derived. That is, when we increase the consumption of good the utility derived from each successive unit is positive. Therefore, total utility increases with increase in units consumed. Furthermore, the marginal utility of the goods is always positive.

  • Economic bad

They are those commodities for which there is an inverse relationship between number of units consumed and total utility derived. That is, when we increase the consumption of good the utility derived from each successive unit is negative. Therefore, total utility decreases with increase in units consumed. Furthermore, the marginal utility of the bad is always negative.

  • Economic neutrals

They are those commodities for which there is neutral/constant relationship between number of units consumed and total utility derived. That is, when we increase the consumption of good the utility derived from each successive unit is zero. Therefore, total utility remains constant with increase in units consumed. Furthermore, the marginal utility of the goods is always zero.

 

So, you see the difference now where a layman thinks that commodities and goods are one of the same thing. We in economics, categorise them differently for the understanding of relationship between utility and type of good.

IMPORTANT POINTS

  • A commodity can be any of the mentioned types it totally depends upon the consumer’s preference (utility derived). Which is shown to you in the table below.
  • A commodity can change it’s type over the period of consumption. That is, during the initial consumption a commodity might be good and after some quantity consumed can turn into a bad.
  • Type of the commodity varies from consumer to consumer.

[table id=1 /]

So, as you see in the above table it is clear that same commodity can vary in it’s types over the period of consumption. It only depends upon the utility derived from the consumption of the commodity.

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