Difference Between Consumption Goods and Capital Goods

What are Goods? 

Goods as defined can be described as those items which help in fulfilling the needs and desires of human beings. Keeping this definition as the base, there are two varieties of goods that are to be studied – Capital Goods and Consumer Goods.

Consumption goods are regarded as those goods which are most well suited for the final consumption. In simpler words, the end-user of the consumer goods is the consumer itself while capital goods are those goods that are used for the production of consumption goods. We will further discuss the difference between Capital and Consumer goods and will address the question ‘What is Consumption Goods?’

Difference Between Consumption Goods and Capital Goods

Capital goods and consumer goods – these terms are used to describe the goods on the basis of how these goods are used. A Capital Good can be defined as any good which is used to help increase future production. While consumer goods are those which are used by the consumers and have no future productive use.

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Also, the same physical good could be either a consumer or a capital good, depending on how well the good is used. An apple that is bought at a grocery store and is immediately eaten is an example of a consumer good. While an identical apple which is bought by a company to make apple juice out of the fruit is a capital good. The difference lies in the utilization of the apple.

Points to Be Noted:

• Capital goods are those goods that are used by one business to help any other business to produce consumer goods.

• Consumer goods are used by consumers which have no future or productive use of their own.

• The capital goods include items like machinery, buildings, and tools.

• Consumption goods example - food, appliances, clothing, and automobiles.

We will learn the differences between the consumption goods and capital goods in the form of a chart but before this, let us learn the meaning of both goods. Before that let us know what each of these goods exactly means. 

Capital Goods

Capital goods are any sorts of tangible asset that is used by one business to produce other goods or services, then it becomes an input for other businesses which will produce the consumer goods. Capital goods are known as intermediate goods or durable goods or economic capital. The most common capital goods namely are – property, plant, and equipment, building in fixed assets, machinery, equipment, tools, motors, and vehicles.  

Capital goods are very different from financial capital. Financial Capital refers to the funds which the companies use in order to grow their businesses. The natural resources that are not modified by the human hands are not considered capital goods, although they both contribute to the factors of production.   

Businesses do not sell capital goods; they use it to make their final product. This means the capital goods do not directly create the revenue like the consumer goods. To financially survive the accumulation of capital goods, businesses rely on savings, investments, or loans.

Economists and businesses pay special attention to capital goods as by playing this role they plan to improve the productive capacity of the company or of the country. In other words, capital goods make it possible for the companies to produce at a higher level of efficiency.

Consumption Goods Meaning

What are Consumption Goods?

A consumption or consumer good is any good that is purchased for consumption and this is not kept for later use for the production of another consumer good. These consumer goods are at times referred to as the final goods because they end up getting into the hands of the consumer or to the end-user. When the economists and the statisticians calculate the GDP, they estimate based on consumer goods.

Examples of consumer goods are food, clothing, electronics, vehicles, and appliances. Consumer goods fall into these three different categories: 

• durable goods

• nondurable goods 

• services. 

Durable goods have a long lifespan which is more than three years, especially motor vehicles, appliances, and furniture. While the non-durable goods are meant for immediate consumption which has a lifespan that is fewer than three years, especially includes food items, clothing, and gasoline. 

Now, let us look at these few points of difference which is defined between consumption goods and capital goods.

Capital Goods Vs Consumer Goods

Difference Between Producer Goods and Consumer Goods

What are Producers Goods?

Producer goods are those types of products that are used by the producers in the production processes. Producer goods include capital goods (like machinery, parts, and equipment), semi-finished products, and raw materials. They contrast with the consumer goods, which are referred to as the final products that are being used by the consumers.

Some goods can be categorized as the producer goods or the consumer goods. Cars, for instance, are both consumers’ and producer’s goods. Also, fuel and computers, both can be personally and commercially used.