What are goods, commodity, need, want, Demand, value and price?

In this article we will learn about goods, commodity, need, want, demand, value, price and utility.

Goods: 

We often confuse the word commodity with goods. Anything that satisfy the customers is a good. In the rainy season, we need umbrella. So, that is a good. Goods are actually a finished product that is offered for sale to the customer.

Commodity:

A commodity is the raw material to produce a finished good. For example: We need wheat to bake a cake. Wheat is the commodity and the cake is the good. Generally the price of commodity is determined as a function of its market as a whole. For example wheat is harvested in a rural area. The price of the wheat will be determined by the total production of wheat.

Need: 

A state of feeling deprivation. For example: when we are hungry, we need to eat. That is what need is.

Want:

Wants are the form of needs shaped by culture and personality. For example: Bangladeshi people eat rice when they are hungry, while the middle eastern people generally eat bread. Another Example: A man like to drink coffee, while another man like to drink tea.

Demand: 

Demands are human wants backed by buying power. Many people want to eat bread, but they need money to buy it. If they have purchasing power the situation is called demand. 

Value:

The usefulness of a good is called the value. For example: We need water to live. Its price is very low. So, value can't be estimated in terms of money. Another example: X need bread. In his eyes, bread is more important than a Opera Ticket. So, in his eyes bread is more valuable even though the price of opera ticket is higher.

Price:

The amount of money we pay to buy a product. I hope now the difference between the value and price is clear.

Utility:

The quality of a good to satisfy a want. We sometime find it confusing with value. Value is the usefulness or the importance of a good and the utility in economics is the total satisfaction received from consuming a good. For example: In hot days, after coming from outside, water is more important compared to bread because water makes us relieve but the cold water has the quality to satisfy us. So, cold water creates more utility than normal water in hot days. There are two types of approach of utility:

1. Cardinal Utility Approach: 

Cardinal utility approach states that we can measure the utility by quantity, amount and number.
For Example: Apple yields 20 units of utility and Orange yields 15 units of utility. This approach is unrealistic as we can't determine the actual quantitative of utility because it is a matter of psychology.

2. Ordinal Utility Approach:

This approach states that we can't measure the utility by quantity, amount and number. We buy things by preferences and choices.
For Example: Some people prefer Apple to Orange. They don't actually measure the levels of utility. This approach is realistic as we can determine the preferences of people. 

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