Capital Goods

Capital goods are physical assets used by businesses to produce goods or services and are not consumed in the production process. These include machinery, tools, buildings, vehicles, and equipment that help in the production of consumer goods or other capital goods. Capital goods are considered long-term assets, as they provide value over many years through their use in production processes.

Example

A factory purchases new machinery to increase its manufacturing capacity. The machinery is considered capital goods, as it is used in the production of other products but is not consumed during the process.

Key points

• Capital goods are long-term physical assets used to produce other goods and services.

• They include machinery, equipment, buildings, and vehicles.

• Investment in capital goods boosts production capacity and economic growth.

Quick Answers to Curious Questions

How do capital goods differ from consumer goods?

Capital goods are used to produce other goods and services and are not consumed directly, while consumer goods are finished products bought for personal use.