In economics, goods are things that can satisfy human
needs and desires. Primarily in modern economics, there are 2 types of goods: Consumer
goods and Capital goods.
Consumer goods are defined as consumable goods which do not need further processing. The consumers are also able to use or consume these goods immediately. For example: snacks, bread, mineral water, toothpaste, shampoo, coffee, cookies, tea and many more.
Capital goods are those goods that need further processing and usually go to production from manufacturers. They usually come in massive quantities and examples include commodities such as wood, log, gold, and half-raw materials. People usually store them in inventory or warehouse as stock for further processing or investment.
Consumer Goods vs Capital Goods
The main difference between Consumer Goods and Capital Goods is that consumer goods are the goods that are used by consumers and do not have any future productive use, while capital goods are the goods that are used by one business to create products that can be used by another business to create consumer goods.
Examples of consumer goods are clothing, vehicle, and food and examples of capital goods are machinery, property, and tools.
The core and only point of difference between Consumer goods and Capital goods is their use. Example of manufacturer brands which produce Consumers goods is Indofood, Wings, ITC, Orang Tua, Unilever, Lions, Coca-Cola and many more.
They produce goods that are commonly used by the majority of people. The consumer goods from these companies include items like candies, wafers, toothpaste, sweet water, soap, cigarette, ready to eat food. In the modern era, many manufacturers now innovate and change their category into fast-moving consumer goods, because the cycle from consumers, production and delivery is indeed fast.
The marketing team sets sales strategies by cooperating with retailers and wholesalers to make their products available and reachable for everyone.
While for Capital goods, we cannot consume them directly, they need to be processed by the manufacturer before they become consumable. The example of the manufacturers includes rail-way companies, property developers, woodworking factories, oil and gas companies, and most likely state-owned companies.
Comparison Table Between Consumer Goods and Capital Goods
| Parameters of Comparison | Consumer Goods | Capital Goods |
|---|---|---|
| Meaning | Goods consumed by an end-user | Goods processed to produce consumer goods |
| Marketing | Business to consumer | Business to business |
| Purpose | Bought for personal consumption | Bought for making other product or finish product |
| Buyer | Consumers | Manufacturers |
| Demand | High | Less |
| Storage or Saving | Home storage (refrigerator, desk, kitchen) | Warehouse, inventory |
What are Consumer Goods?
In Economics, every tangible product or commodity that is produced to satisfy and fulfill market needs is called Consumer goods. It could also be classified into three types such as durable goods, nondurable goods, and services.
Durable
goods are usually having a significant life span, often three years or more
like a battery, remote control, furniture, and most likely electronics.
While
non-durable goods will expire in a matter of months to 1 year such as food and
beverages, clothes, soap, and things that house-chores need.
Some people may think that services are not part of consumer goods but that is not true. Consumer-facing services are intangible products or actions consumed simultaneously.
The examples of these include haircuts, auto repair, landscaping, sales-marketing, and home or web designing.
What are Capital Goods?
Meanwhile, Consumer goods end after delivery to end-user, Capital goods still need to be processed before they can be used. The user of capital goods is usually the other companies that later will produce consumer goods (this is what we called business to business B2B).
There are 3
types of Capital goods: Property, Plant, and Equipment (fixed asset).
The examples of Capital goods are buildings, factories, machinery, vehicles, etc. And examples of Capital goods used for a service business are hair masks used by hairstylists, a computer used by a web designer, etc.
Like Consumer goods, capital goods are also classified as a tangible asset, because they could be measured, have monetary value, and usually have a physical form.
The storage amount of capital goods is most likely bigger than consumer goods.
Demand and pricing
Consumer goods are usually cheap and depend on market demand. Capital goods are costlier, but the price is more stable, because of lesser demand.
Conclusion
Consumer goods and capital goods are two different things yet the final product comes in the hand of consumers.
Consumer goods in terms of chain flow and market are much higher than capital goods because of their usage and demand.
Consumer goods are easy to reach by consumers yet capital goods are meant to be processed first before consumed.
Consumer goods are tangible products that have the main use to satisfy current needs, while capital goods are not to be consumed directly but purchased to make other consumable products.
When it comes to durability, capital goods are having a longer life span and mostly become an investment while consumer goods are comparatively short because of personal use purposes.
In any economy, there are fluctuations that directly affect the market price and flow. Consumer goods usually follow the tides while capital goods are comparatively stable and tend to get higher by the time.
References
- https://link.springer.com/chapter/10.1007/978-1-349-81529-6_9
- https://academic.oup.com/oep/article-abstract/15/3/217/2360262
- https://www.ingentaconnect.com/content/mcb/007/1993/00000007/00000003/art00005