Final answer:
The statement is true, as goods are tangible items like consumer and capital goods, while services such as haircuts and banking are intangible. Intangible aspects of a product, like reputation and additional services, play a significant role in product differentiation.
Step-by-step explanation:
The statement that products are often classified as tangible, whereas services are intangible is true. Goods, such as consumer goods like shoes and backpacks, or capital goods like school computers, are considered tangible because they have a physical form and can be seen, touched, and used physically. On the other hand, services such as haircuts, insurance, and banking are intangible; they do not have a physical form and represent a performance or action that one pays for.
Intangible aspects also play a role in product differentiation, such as promises of satisfaction, reputation for high quality, or additional services like free delivery which can create preferences in the minds of consumers. This psychological component demonstrates that even though a service is intangible, it still provides value and satisfaction to the consumer, much like tangible goods.
Therefore, when we refer to economic products, we include both tangible goods and intangible services, as both are used to meet people's needs and wants. This understanding underlies fundamental economics questions such as what goods and services are required, how they will be produced, and for whom they will be produced.