Goods and Services

Goods and Services
Resources are combined in a variety of ways to produce goods and services. A farmer, a tractor, 50 acres of land, seeds, and fertilizer combine to grow the good: corn. One hundred musicians, musical instruments, chairs, a conductor, a musical score, and a music hall com- bine to produce the service: Beethoven’s Fifth Symphony. Corn is a good because it is something you can see, feel, and touch; it requires scarce resources to produce; and it satisfies human wants.The book you are now holding, the chair you are sitting in, the clothes you are wearing, and your next meal are all goods.The performance of the Fifth Symphony is a service because it is intangible, yet it uses scarce resources to satisfy human wants. Lectures, movies, concerts, phone calls, broadband connections, yoga lessons, dry cleaning, and hair- cuts are all services.
Because goods and services are produced using scarce resources, they are themselves scarce. A good or service is scarce if the amount people desire exceeds the amount available at a zero price. Because we cannot have all the goods and services we would like, we must continually choose among them.We must choose among more pleasant living quarters, better meals, nicer clothes, more reliable transportation, faster computers, and so on. Making choices in a world of scarcity means we must pass up some goods and services.

Sometimes we mistakenly think of certain goods as free because they involve no appar- ent cost to us. Subscription cards that fall out of magazines appear to be free.At least it seems we would have little difficulty rounding up about three thousand if necessary! Producing the cards, however, absorbs scarce resources, resources drawn away from competing uses, such as producing higher-quality magazines. You may have heard the expression “There is no such thing as a free lunch.” There is no free lunch because all goods and services involve a cost to someone.The lunch may seem free to us, but it draws scarce resources away from the production of other goods and services, and whoever provides a free lunch often ex- pects something in return. A Russian proverb makes a similar point but with a bit more bite: “The only place you find free cheese is in a mousetrap.” And Albert Einstein said, “Sometimes one pays the most for things one gets for nothing.”