Product

1) Meaning of products

• When people do physical or mental work to satisfy other people’s wants through exchange, the result they provide (goods or services) is called a product or output.
• So, products include both goods and services.

2) Goods

• Goods are tangible (physical) items; they can be seen and touched.
• In economics, goods are tangible items that give satisfaction when they are used or consumed.

Examples:

• Food items: rice, wheat, meat, eggs, fish
• Clothing: shirts, trousers
• Other goods: furniture, house, car, bicycle

3) Services

• Services are intangible; they cannot be seen or touched.
• They are activities performed to satisfy human wants.

Examples:

• Services of doctors, teachers, lawyers, engineers
• Banking, insurance, transport, tourism, medical treatment

Products can be classified on four bases:

1) Based on productive activities

• Primary products
• Secondary products
• Tertiary products

2) Based on process of production

• Intermediate products
• Final products

3) Based on durability

• Non-durable products
• Durable products

4) Based on use

• Consumer products
• Investment (producer/capital) products

Economic activities are grouped into primary, secondary and tertiary activities. The products from these activities are called primary, secondary and tertiary products.

1) Primary products

• Produced by primary activities that use natural resources.
• These are basic goods directly obtained from nature.

Examples:

• Food grains: wheat, rice
• Dairy products: milk, curd, butter
• Other: fruits, vegetables, fish, wood

2) Secondary products

• Produced by secondary (industrial/manufacturing) activities.
• Natural primary products are used as raw materials to make manufactured goods.

Examples:

• Finished steel made from iron ore
• Fabrics and clothes made from cotton
• Packaged foods made from crops

3) Tertiary products

• Produced by tertiary (service) activities.
• These are service products that support primary and secondary sectors and also serve consumers.

Examples:

• Banking and insurance services
• Tourism and transport services
• Medical and educational services

Here, products are divided into intermediate products and final products.

1) Intermediate products

• Goods produced to be used in making other goods.
• They are not meant for direct use by the final consumer.

Examples:

• Car parts (tyres, seats, glass) bought from other industries during car production
• Flour used by a bakery to make bread

2) Final products

• Goods that are ready for final use.
• Purchased by final consumers for consumption or by firms for investment.

Examples:

• A complete car sold to a customer
• A TV bought for home use
• A finished house ready for living

Here, goods are divided into non-durable and durable products.

1) Non-durable products

• Goods that are used up in a short time, often quickly and sometimes perishable.
• They give satisfaction only once or a few times.

Examples:

• Milk, bread, fruits, vegetables
• Soap, shampoo, cooking oil

2) Durable products

• Goods that last for a long period and give services many times.
• They are not fully used up in one or two uses.

Examples:

• Cars, refrigerators, TV sets
• Furniture, washing machines, computers

Here, products are divided into consumer products and investment (producer/capital) products.

1) Consumer products (consumer goods)

• Goods that are directly consumed to satisfy human wants.
• Mainly purchased by households.

Examples:

• Food items: bread, rice, biscuits
• Clothing: shirts, trousers, shoes
• Daily-use goods: toothpaste, soap

2) Investment products (producer or capital goods)

• Goods used to produce other goods and services, not for direct consumption.
• Used mainly by firms and producers.

Examples:

• Machines and tools in a factory
• Equipment and plant
• Raw materials like steel, wood, cement used in production

Important note (same good, different use):

• A car used by a family for personal travel → consumer durable.
• A car used by a taxi company to earn income → investment (capital) good.

1) School:

• Textbooks, notebooks → goods (consumer products).
• Teaching by teachers → service (tertiary product).

2) Home:

• Food items your family buys daily → non-durable consumer goods.
• Fridge, TV, washing machine → durable consumer goods.

3) Business:

• Factory machines, tools → investment products.
• Steel, wood used to make furniture or buildings → intermediate products / capital goods.

• Products include both goods and services, and both satisfy human wants.
• Goods are tangible, services are intangible.
• On the basis of productive activities, products are primary, secondary, or tertiary.
• On the basis of process of production, products are intermediate (inputs) or final (ready for use).
• On the basis of durability, goods are non-durable (short life) or durable (long life).
• On the basis of use, products are consumer goods (for direct consumption) or investment/capital goods (for further production).
• The same good can be consumer or investment good, depending on how it is used.