- Capital goods are produced durable outputs of a man-made process.
- They act as inputs for further production processes (to be sold).
- They do not get transformed or consumed while acting as input.
- Example: A tractor used to produce agricultural products.
- Consumption goods are consumed by ultimate consumers.
- They meet the immediate need of the consumer.
- Example: Food, clothing.
Examples of Dual-Purpose Goods
- A particular good can be both a consumption and a capital good.
- Example: A washing machine used at home is a consumption good.
- The same washing machine bought by a laundry service is a capital good.
- Example: A car bought for home is a consumption good.
- A car bought by “Ola Cabs” for transportation services is a capital good.
Diagram: Goods and Capital
- Financial and Intellectual Capital: Intangible assets like money, patents, and copyrights.
- Physical Capital: Tangible assets like machinery and equipment used in production.
- Capital Goods: Durable outputs used as inputs in production, not transformed or consumed.
- Consumption Goods: Goods consumed by ultimate consumers, categorized into durable, non-durable, and services.
- Intermediate Goods: Semi-finished products requiring further processing to become final goods.