Q.Examine the difference between Free Goods and Economic Goods.
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Start your 14-day free trial to unlock the full solution →Free goods are nature's gifts available in abundance, with no price and no cost of production (air, sunlight, rainwater), whereas economic goods are scarce, command a price and need effort or money to obtain. Scarcity and price are the dividing line, and economics is mainly concerned with economic goods.
Free goods
Free goods are those provided freely by nature and available in such large quantity that their supply exceeds demand. They have no price, cost nothing to obtain, and need no human effort to produce.
Economic goods
Economic goods are scarce in relation to human wants. They have a price, must be produced with human effort and resources, and can be bought and sold in the market.
Distinction
| Basis | Free Goods | Economic Goods |
|---|---|---|
| Availability | Available in abundance by nature | Scarce relative to wants |
| Price | Have no price | Command a price |
| Cost / effort | Need no cost or human effort | Require effort, resources, money |
| Supply and demand | Supply exceeds demand | Demand tends to exceed supply |
| Examples | Air, sunshine, rainwater | Food, clothing, books, machines |
| Relevance to economics | Not the subject of economics | Central subject of economics |
| … |
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