Difference between Goods and Services: A quick overview
Goods and services are fundamental components of an economy, and these two words are commonly used in the majority of significant economic discussions. Both of these are described in detail in the following paragraphs in layman’s terms.
We come across a wide range of goods and services in our everyday lives. We take food when we are hungry. We drink water when we are thirsty. Similarly, we require several goods such as a pen and paper for writing, a home to live in, furniture to sit in, a washing machine to wash our clothing, and a television to watch movies and tv shows, among others. All of these are instances of goods that meet our needs.
However, goods alone are insufficient to satisfy our desires. We require the services of various people for numerous jobs. For example, we need a hairdresser to trim our hair, a doctor to treat us, a tailor to sew our clothing, a cobbler to repair our shoes, a finance expert to look after our finances, and so on. These are only a few instances of services to address our needs. Human desires are met by both goods and services. These goods and services are as diversified as our desires are.
From a business’s perspective too, the success of a business is based on a combination of high-quality goods and the provisioning of customer-centric services. Goods and services are offered by the companies to their customers to provide utility and to satisfy their demands.
Difference between goods and services
Now that we’ve established that both goods and services are necessary to satisfy human desires, let’s look at how they vary. The primary points of differentiation are as follows:
Goods
1. In nature, goods are tangible, which means they can be seen and touched.
2. Goods are created first and consumed afterward, and hence there is a temporal lag between their production and consumption.
3. Further, based on their durability, goods are classified as either durable or non-durable. Durable goods last a long period, but non-durable goods perish faster than durable goods.
4. They can be kept in inventory, stored, and used as and when needed.
5. They may be moved or transferred from one location to another. Also, the title in ownership can be transferred to another person.
6. Because of their physical nature, goods have a certain structure, size, and shape. They may be mass-produced in a homogeneous manner to meet market demand.
7. Goods can be separated from the seller.
8. A customer does not participate in the production process of goods.
9. If a customer is dissatisfied with the purchased goods, he or she may return them and receive a refund.
Let us consider a single good as an example, such as a chair. You can see and even touch a chair. The carpenter manufactures it initially in his workshop. You put it to use after acquiring it at the market. As a result, there is a time lag between the manufacture and its ultimate usage. If you don’t need that chair right now, you may keep it in your store and utilize it when you need it. You can even donate it or sell it to someone else.
Services
1. Services are non-tangible in nature, which means they cannot be seen or touched.
2. There is no time lag between when services are produced and when they are consumed. That is why they are both generated and consumed at the same time.
3. As a result, services are perishable in nature since they must be given at the precise moment when the consumer requests them.
4. They cannot be stored in inventory for future use.
5. Transfer of service is also not possible. Moreover, the title in ownership can’t be transferred. It means one cannot own service but can only avail it from a service provider.
6. They are heterogeneous and diversified. Services are never precisely the same; variation in experiences can be induced by location, time, geography, season, the environment, facilities, events, and service providers. Because humans play such a prominent role in the provision of services, the quality and degree of service may vary between vendors or may even be inconsistent within one provider’s place.
7. Services cannot be separated from the service provider. It exists only at the time or during the period when a person is engaged and absorbed in the experience.
8. Customers actively participate while a service is being rendered to them.
9. Once received, services cannot be returned or replaced, however, in some cases, money can get refunded.
Consider the example of a doctor’s services. A doctor examines a patient and provides prescriptions for medications. He has now rendered a service (for the patient’s medical treatment) that we cannot see or touch. The instant he examines the patient, he has delivered his services, which are also consumed by the patient at the same time. As a result, there is no time lag between the creation and consumption of service. This service can neither be stored nor transferred.
In nutshell
Keynote: Goods are produced whereas services are performed.
Goods are tangible commodities that can be touched, seen, or felt and that are available for sale to customers. On the other hand, a service is an activity that one person can provide to another without relinquishing ownership of anything. They might differ in characteristics, however, the purpose of both is similar and is to provide utility and satisfy the wants of consumers.
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