Capital Goods

What are Capital Goods?

Capital goods are nothing but tangible assets a business owns. These assets could be buildings, equipment, machinery, etc. These are assets that one business uses which is then used to produce other goods and services.

Producing consumer goods is the end result of the process. Goods that are purchased by those who provide services can also be called as capital goods. This could be small wires or even ACs for a business. Make material for a beauty parlour and even musical instruments played by musicians can be considered as capital goods since they are purchased by those who provide a service.

It is important to note that capital goods go into the production of other goods, but they are not involved in the Manufacturing process of those goods. Meaning they are not Raw Materials.

Difference between Capital Goods and Consumer Goods

There are quite some differences between capital goods and consumer goods.

Here's a table that explains difference between Capital Goods and Consumer Goods:

Example of Capital Goods

Many things can be used as both capital and consumer goods. It depends on how it is put to use. A building can be both capital or a consumer good. It would be a capital good when it is used for business purpose. Whereas when it is used for housing, it would be known as consumer good.

Likewise, vehicles can be used for both commercial and personal purposes. Using goods for commercial purposes is what makes them capital goods. Computers, laptops, refrigerators, etc purchased for business use is capital goods.