Product - Term Overview

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A product for the economy is defined as the result that is obtained from the production process within a company.

Therefore, everything that is produced or that results from the production process is a product. From an economic point of view, a product is everything that is exchanged in the market.

That is why they are products, both the goods of which the company has an inventory or the goods that are already in the possession of consumers.

It's also considered a product for the economy, everything from which an income or income can be obtained, such as the percentage return that an investment such as a bond can generate.

Types of products in economics

In economics, products can be classified into consumer products and investment products.

1. Consumer products

On the one hand, consumer products are those that are produced with the purpose of satisfying a need on the part of the consumer.

Apart from, the most important purpose of any production process is consumption. For this reason, a direct relationship is maintained between production and consumption.

That is, you cannot consume what has not previously been produced and scarce resources aren't produced or spent to produce goods, which are ultimately not going to be consumed.

Indeed, production seeks to generate goods that simplify the lives of consumers, in order to achieve the best satisfaction of the needs that arise in people's daily lives. For this reason, products are created that are functional, attractive, that are easily introduced to the market and that can be obtained at good prices.

Characteristics of a consumer product

The characteristics of consumer products are:

A. They are economic goods

Above all, consumer products are economic goods because they are limited, which implies that scarce resources have been used in their production process, which is why their production process has a cost and we cannot produce everything we need; they are also inexpensive because they are priced within the market.

B. They can be material or immaterial

On the other hand, some products have a material or tangible consistency such as a car, a toothbrush or a computer, among others.

In the same way, there are intangible or immaterial consumer products that we call services, but they also solve a need such as medical, educational or legal advice services, among some that can be mentioned.

C. They have to be produced

Likewise, they have to be produced, this means that the production factors must be used to be elaborated, since companies use inputs, labor and capital to be able to carry them out.

D. They are exchanged in the market

In the same way, to obtain these products a price must be paid and this price is established with the interrelation of the processes of supply and demand.

E. They are produced by different economic agents

Apart from being produced by different producers, it creates competition in the marketing process in the market, and finally it's the consumer who determines which products will be demanded according to their tastes and preferences.

2. Investment product

On the other hand, an investment product is any good or service that is used to produce other goods or to generate wealth, because these products generate income or income.

Of course, this helps us understand that not all products that are generated within the economy are for consumption, but that there are other products that have the purpose of increasing the level of production of other consumer products or making different goods. capital.

For example, we can say that steel is a product that can be used to produce a car; If this vehicle is for the personal use of a family, this investment product is intended to produce a larger quantity of consumer goods.

Now, if steel is used to manufacture a tractor that will be used to make agricultural work more productive, the investment product is serving to create a new capital good, since it will be used to make production work more efficient.

Another way to understand investment products

They can also be considered investment products, when a certain amount of money is invested in the financial market to generate a return.

These products can be classified as follows:

A. Equity products

In relation to the variable income product, as its name implies, it produces a diverse performance, since it's always changing; in this case we can mention the performance of the shares that are bought in the stock market.

Undoubtedly, the performance of the shares is uncertain since it can be affected by many variables, which can have a positive or negative impact, therefore this investment product can be risky, although it could lead to a higher return.

B. Fixed income products

Regarding fixed income products, from the moment the investor decides to purchase this type of investment, he knows with complete certainty the return that he will obtain from his acquisition, therefore they are the products that present less risk, but also produce a lower return.

As an example we can mention the acquisition of bonds, whether public or from private institutions.

C. Investment fund products

While, investment funds are formed with the contribution of capital from different people, who act as minority investors and then specialized companies negotiate these capitals in order to obtain a higher profit margin, than can be obtained if the investment is made in the individual.

D. Derived products

Consequently, derivative products are called, those whose value depends on another asset that is traded, to exemplify it would be the case of the future value of gasoline, which will depend on the price of crude oil.

E. Hybrid products

Then the hybrid products, they receive that name because they are products that mix income that is fixed and income that is variable, the most common examples are convertible bonds and preferred shares.

F. Structured products

Structured products are given when several investment products are joined or put together, so their use is quite complex, for this situation it's convenient that the person who invests in this type of product clearly knows how it works or has advice. adequate, to take less risk.

Finally, we can say that product in economics is any good or service that results from the production process. Products are consumer products when they are used to meet the daily life needs of consumers and investment products when they are used to create more productive wealth.

Investment goods make it possible to create more consumer products or more capital goods that increase the possibility of producing more efficiently.

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