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CAPITAL GOODS

Capital goods include goods such as tools and machinery that businesses use to produce consumer products and services. Capital goods are distinguished from consumer goods, which are not used in the production process and are intended for personal consumption. Capital goods use resources in such a way that they increase the capability of the production process. As a result they help to make more goods available to society than would ordinarily exist. For this reason some economists believe that capital goods represent an efficient use of the earth's limited resources. Capital goods can be considered fixed goods, that is, assets that are necessary to carry on a business. Fixed goods cannot be readily converted to cash and include equipment, buildings, and land. Capital goods are often called productive capital because they represent the potential capacity to produce future consumer goods.

See also: Consumer Goods