What are the various types of goods? (With examples)

By Indeed Editorial Team

Published 14 November 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

There are many different types of goods, and each category varies depending on how individuals consume, price and produce them. Regardless of whether you work in the private or public sector, it can be useful to know about the various categories of goods. Learning about these categories may also improve your knowledge of economic theory. In this article, we list the different categories of goods.

What are the various types of goods?

There are various types of goods, all of which are materialistic items that companies sell to consumers. You can classify goods according to their physical properties, their uses and how businesses market them. For example, a piece of jewellery made from gold is a luxury good due to the value of the metal used to produce it. Its use is primarily for decorative purposes, making it less of an essential item to purchase. Moreover, the company making the jewellery may market the item in such a way that it makes consumers feel like it's a luxury product.

Some goods are also perishable and this may affect how individuals classify them too. Goods are generally tangible items and differ from services, which are actions performed by skilled professionals, such as an estate agent helping to sell your home. Here are the different categories of goods:

Normal goods

Normal goods are those that consumers buy more of when their income increases. A person also tends to buy less normal goods when their income decreases. A prime example of this is food, as when food prices increase, people tend to buy less food overall or switch to cheaper alternatives. Some other examples of normal goods include:

clothing from non-luxury retailers
household appliances
non-luxury cars

Luxury goods

A luxury good is an expensive and high-quality product. The price of these goods is relative to their quality, so if you buy a luxury good, you can expect to get more than just an item that looks nice. To determine whether something is a luxury good, it's necessary to consider the cost of the product compared to similar items, the quality of the product compared to similar ones and whether it has any additional features. For example, clothes from a named brand are an example of a luxury good. Some other examples of luxury goods include:

luxury cars
fine wines and spirits
expensive watches and jewellery

Inferior goods

An inferior good is a product that becomes less desirable as an individual's income increases. This means that when a person starts to earn more, they gain more purchasing power and can subsequently afford to purchase more premium alternatives. Inferior goods are typically inexpensive and people with low incomes usually purchase them. Inferior goods may include food items, such as bread, vegetables and milk. As these customers earn more money, they may decide to purchase organic versions of these products or other more premium foods, such as steak. Some other examples of inferior goods include:

toilet roll
kitchen roll
washing up liquid
shampoo
instant coffee
tinned fruit or vegetables

Comfort goods

Comfort goods are products that people buy to make themselves feel better, which means they often lack a lot of practical use. People typically buy comfort goods when their mood is low or when they're feeling anxious or stressed about something, and they may use this particular good to distract them from these worries.

As comfort goods help to make people feel good about themselves, they can vary according to personal preferences. For example, a comfort good for some might be a massage, bubble bath or spa day, but for others, a comfort good might be a new video game or football shirt. Some other examples of comfort goods include:

scented candles
jewellery
warm socks
slippers
books

Complementary goods

Complementary goods are items you use with another good. An example of this is a razor and a blade, as you can't use one without the other. In economics, complementary goods help explain how people make choices between different products and services. For example, a consumer may choose to buy a more expensive car because they want to drive around in style and feel good about themselves when doing this. Alongside this, they may choose to spend money on expensive clothes and accessories so they look good when driving around. Some other examples of complementary goods include:

computers and printers
toasters and bread
ice cream and ice cream cones
mobile phones and phone chargers
cars and petrol

Giffen goods

A Giffen good is a product that experiences an increase in demand when its price increases. Sir Robert Giffen first identified this phenomenon in 1896, hence its name. A good example of this type of product is potatoes, as people still buy more of them even when they become more expensive.

The idea behind a Giffen good is that when people have low incomes, they spend a greater proportion of their income on food and may look for cheaper alternatives to save money. Potatoes, though, are a food staple that lacks substitutes, so people continue to buy more at higher prices. Below are some other examples of Giffen goods:

rice
wheat
cooking oil
bread

Necessity goods

A necessity good is a product that people need for survival. It's a good that lacks substitutes and is also private. Generally, people view these goods as inferior products because as an individual's income increases, they tend to buy more of them. For example, if you have a low income, you may purchase more basic food items, such as bread or eggs, as your income increases, you may opt to buy more luxury items instead. Below are some examples of necessity goods:

food and drink
clothing
shelter

Veblen goods

A Veblen good is a product that increases in demand because of its high price. The term comes from the economist Thorstein Veblen, who first described this concept. This happens because the higher price makes the product seem more valuable and of a higher quality. Due to this, consumers feel like it's necessary for them to buy it to fit in with others.

An example of this is a pair of designer shoes. These may carry a higher price tag than other types of shoes as they're made from more expensive materials and may become an influential trend. Some other examples of Veblen goods include the following:

cigars
luxury cars
designer clothing
diamond jewellery

Merit goods

Merit goods benefit society when consumed. The most common example of a merit good is education. When you invest in your own education, you're investing in the future of all the people who live in your community, as you use this education to make beneficial changes to society. While some people may not be able to afford to pay for their own education outright, they can often obtain government-backed loans or grants to access this. Below are some other examples of merit goods:

healthcare
family planning
healthy foods

Demerit goods

A demerit good is a heavily taxed product that society thinks is unhealthy and undesirable. In theory, this tax intends to offset the externalities caused by that good's consumption. For example, many countries heavily tax cigarettes because of the negative effects smoking has on society, such as ill health and increased litter from cigarette butts.

Often, people use these demerit goods recreationally and they may have negative and positive associations. For example, while society may associate alcohol with a fun and exciting night, it also negatively associates it with various social issues, such as binge drinking. Some other examples of demerit goods include:

cigarettes
junk food
lottery tickets
recreational drugs