Economics – The basic economic problem - Economic goods and free goods | e-Consult

The fundamental difference between economic goods and free goods lies in their scarcity and the associated allocation mechanisms. Economic goods are scarce resources; their availability is limited relative to demand. This scarcity necessitates choices about how they are used, leading to allocation problems and the need for decision-making by individuals, businesses, or the government. Free goods, on the other hand, are not scarce. They are available in unlimited quantities and do not require choices about their allocation.

Examples of Economic Goods:

• Petrol: Petrol is a finite resource, and its supply is limited. People must decide how to allocate it (e.g., for commuting, industry).
• Healthcare: Healthcare resources are limited, and there's often a debate about how to allocate them (e.g., funding different treatments, prioritizing patients).

Examples of Free Goods:

• Air: Air is available to everyone without requiring any allocation.
• Sunshine: Sunshine is naturally abundant and doesn't require any decision-making regarding its use.