FREE GOODS: CHARACTERISTICS AND EXAMPLES - ECONOMY - 2024

The free goods are scarce resources are not, and therefore are available without limit. A free good is available in any quantity that is desired, with zero opportunity cost to society.

A zero opportunity cost means that the good can be consumed in whatever quantity is needed, without reducing its availability to others. This contrasts with an economic good, which is a good where there is an opportunity cost in consumption.

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Free goods, whether for consumption or productive inputs, are goods that are useful, but not scarce. They have an abundant enough supply that all agents can have as many of them as they want, at zero social opportunity cost.

More abstractly, a free good is a good for which supply is not less than demand at zero price, in the sense of social opportunity cost.

An important distinction is that the fact that a good is given away, because it is free, does not necessarily mean that it is a free good.

characteristics

Supply far exceeds demand

Free goods exist in large quantities that meet everyone's needs for them. Therefore, there is no shortage of these goods and there is no need to ration them later among the people.

Breathing air is a very important resource for survival. The quality may differ by location, but it exists everywhere and is available for people to breathe.

Are readily available

An excess supply of goods is not enough to qualify them as free goods. Goods must also always be available. Fresh water is drinkable and used for activities such as cleaning, which makes it valuable for our survival.

People who live by a lake would not have to worry too much about its availability. They always have access to it when they need it, making fresh water a free good.

However, for people who live in harsh deserts, the only time they will have access to water is when they reach an oasis or during those rare times of rain. Fresh water is something they would value and pay a good amount of money for. In this case, fresh water is no longer a free good.

One consequence of the first two characteristics is that because free goods are abundant and readily available, people can get them for free.

They may or may not be of value to people

The fact that a good is free does not mean that it lacks value or usefulness for people. Breathable air remains a critical resource for survival and it is fortunate that it is abundant, available and free.

The same cannot be said for seawater. Although there are studies that examine the possible use of seawater in industries such as agriculture, its inability to drink it makes this resource worthless for many people.

Differences with economic goods

Economic goods are those that have a price and their supply is scarce or less in relation to their demand. The production of such goods requires scarce resources with alternative uses. For example, land is scarce and capable of producing rice or sugar cane.

If the farmer wants to produce rice, he will have to give up sugarcane production. The price of rice is equal to the sugarcane production lost by the farmer.

Thus, economic goods are related to the problem of saving scarce resources for the satisfaction of human needs. In this sense, all material goods are economic goods.

Non-economic goods are called free goods because they are free gifts from nature. They have no price and their supply is unlimited. Examples of free goods are air, water, sunlight, etc.

Free goods as economic goods

The concept of free goods is relative to place and time. Sand near the river is a free good, but when it is collected in a truck and taken to the city for the construction of a house, it becomes an economic good. Now it is scarce in relation to its demand and so it gets a price.

There was a time when water could be taken for free from wells and rivers. Now when it is stored and pumped into homes through pipes, it is sold at a price to consumers.

Therefore, what is now a free good can become an economic good with technological advance. For example, air that is a free good becomes an economic good when air conditioners, room coolers, and fans are installed.

Examples

Air

Oxygen is something that you need and you can breathe. There is no element of rivalry. For example, when someone breathes, there is still enough air for others to breathe.

Water

In many environments, water will be a free good. For example, if a small community lives next to a river, it can easily take in as much water as it wants with very little effort. If you drink water from one river, there will be much more available to everyone else.

However, water could become an economic good in dry environments. In desert areas, water is not abundant. Society has to dedicate many resources to the production of drinking water.

Therefore, water is scarce and is no longer considered a free good. It is sometimes referred to as a "common good" as it is freely available to all, but at any given time there is a limited supply.

Intellectual ideas

If a new invention is developed and not patented, such as yoga exercises, how to tie a knot, etc., anyone can reuse this idea at no opportunity cost. Other examples include computer programs and web pages.

If you look at a web page, you cannot prevent other people from consuming the product, as it is available at no opportunity cost.

Sunlight

Sunlight is always available every day for all people, with all the benefits that this represents.

By-products

If heat is generated from running a recycling plant, this creates good heat with no opportunity cost.

Music

Once a song is composed, all people are free to sing that melody.

References

1. Natasha Kwat (2019). 3 Main Types of Goods. Economics Discussion. Taken from: economicsdiscussion.net.
2. Wikipedia, the free encyclopedia (2019). Free good. Taken from: en.wikipedia.org.
3. Tejvan Pettinger (2017). Definition of a free good. Economics Help. Taken from: economicshelp.org.
4. Ian Steedman (2019). Free Goods. Springer Link. Taken from: link.springer.com.
5. Emmanuel Espejo (2017). Characteristics of Free Goods in Economics. Bizfluent. Taken from: bizfluent.com.