Economics · Ch 2 — Fundamental Concepts and Terminologies
Wants and Goods
Wants and Goods
Every economic activity begins with a want — a felt need that motivates a person to work, earn, and spend. A person feels a want, works to earn income, and spends that income to satisfy the want, which in turn creates fresh wants; this never-ending cycle (want → effort → income → satisfaction → new want) is often called the wheel of wants.
Characteristics of wants
- Wants are unlimited — satisfying one gives rise to another.
- Wants are recurring — the same want (hunger, thirst) returns again and again.
- Wants vary in urgency and intensity — some are more pressing than others at a given moment.
- Wants can be competitive (satisfying one uses up resources needed for another) or complementary (satisfying one requires satisfying another alongside it, e.g., a scooter and petrol).
- Wants change with age, income, fashion, and custom.
Types of wants, in order of priority:
- Necessities — essential for survival (food, clothing, shelter) and "necessities for efficiency" that keep a person fit for work (a nutritious diet, basic education).
- Comforts — goods that add ease and convenience but are not essential for survival (a fan, a cushioned chair).
- Luxuries — goods whose consumption goes well beyond ordinary comfort, often signalling status (a diamond watch, an imported car).
A good is anything, tangible or intangible, capable of satisfying a want. Goods are commonly classified as follows:
| Basis of classification | Categories | Example |
|---|---|---|
| Availability | Free goods (unlimited natural supply, no price) vs Economic goods (scarce, command a price) | Sunlight (free); Wheat (economic) |
| Use | Consumer goods (satisfy wants directly) vs Capital goods (used to produce other goods) | Bread (consumer); Machinery (capital) |
| Durability | Durable goods (used repeatedly over time) vs Perishable goods (used up in a single use) | Furniture (durable); Milk (perishable) |
| Relationship to other goods | Substitute goods (one can replace another) vs Complementary goods (used together) | Tea/coffee (substitutes); Pen/ink (complementary) |
A given example should always be placed correctly into these categories with a stated reason, since examination questions on this topic usually ask for classification with justification rather than a bare definition.
A felt need whose satisfaction motivates economic activity.
A good available in such abundant natural supply that it commands no price (e.g., sunlight, open air).
A good that is scarce relative to the demand for it, and therefore commands a price.