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lectur5-page29 - People cannot have all of the good that...

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29 29 Goods are Tangible Items that Consist of: u Economic Goods Consumer Goods » Durable Goods: last 3 years or longer » Non-durable Goods: last less than 3 years Capital Goods u Free Goods Economic goods always have a prices associated with them. Price is a rationing mechanism used by our society to equate demand (consumption) and supply (production). Economic goods exist when the quantity of the good desired by consumers exceeds the quantity made available by producers when the price is equal to zero.
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Unformatted text preview: People cannot have all of the good that they want at this zero price, so society must ration out what is available. Price increases above zero until an equality is reached between consumption and production. A free good, on the other hand, is available in quantities in excess of what people desire at a zero price (free). Here the quantity available to consumers in greater that the quantity of the good desired by consumers at a price equal to zero....
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