Consumer Goods vs Capital Goods – Difference and Comparison

What are Consumer Goods?

Consumer goods are products bought by the average consumer for personal use or consumption, also referred to as the final good of production and manufacturing.

Customers can only use these products. They are not used in making additional products and goods.

Consumer goods are divided into three types: durable goods, non-durable goods, and services.

Durable goods are those products and goods that last for a longer period, three years or more, and can be used regularly.

These goods are rarely purchased because these products are costly. Instead, customers think wisely before buying them.

Vehicles, mobile phones, furniture, and all household appliances are examples of durable goods.

Non-durable goods are those products that have a life span of minutes to three years. Moreover, it can be used only once.

These products are also termed useful products because they are goods that customers use and purchase regularly.

Food, beverages, clothing, laundry detergent, and soap are examples of non-durable goods.

Service goods are for-hire or paid goods that consumers pay for. Haircuts, plumbing services, and auto repairs are examples of service goods.

What are Capital Goods?

Capital goods are man-made, durable, useful assets that are used by industries and manufacturers to produce goods and services.

Capital goods are also known as plant, property, and equipment or PPE in accounting.

These goods are later used to create a final product that customers purchase for their purposes.

Capital goods are the key to keeping business growing. Because without them, businesses wouldn’t be able to work.

Some common examples of capital goods include vehicles, landscaper tools, equipment, buildings, etc.

To produce goods, four factors are most important, which include capital goods, land, labor, and entrepreneurship. These are known as the primary factors of production.

Capital goods are high-purchasing products and play a vital role in today’s economy.

They not only guide companies to produce goods but also support as a barrier for companies to begin their manufacturing process.

It is clear that machines and equipment are fairly expensive, but the production is impracticable about them.

That’s why some businesses might seek help from other companies to supply their products.

Difference Between Consumer Goods and Capital Goods

  1. Consumer goods are defined as goods purchased by customers. Capital goods are those products that tend to produce final goods.
  2. Consumer goods are mainly bought for personal use, while capital goods are bought to generate other products.
  3. Customers buy consumer goods, whereas buyers of capital goods are manufacturers.
  4. Suppliers decide the prices of consumer goods as the prices of capital goods set by companies.
  5. Consumer goods are lower priced as compared to capital goods.

Comparison Between Consumer Goods and Capital Goods

Parameter of comparisonConsumer goodsCapital goods
DemandConsumer goods have direct demand as they meet the needs of consumers directlyCapital goods have derived demand as they meet the needs of consumers indirectly
PurposeThese goods are bought for personal useThese goods are purchased for the production of other products
BenefitsThese goods generally have short-lived benefits, and thus, it does not include any depreciationBenefits from these goods should last for a longer duration and thus be depreciated accordingly
 Production capacityConsumer goods are not involved in increasing the production capacityCapital goods are involved in increasing the production capacity
Marketing policyThese goods are sold by the business-to-consumer (B2C) marketing policyThese goods are sold by the business-to-business (B2B) marketing policy

References

  1. https://www.jstor.org/stable/2661716
  2. https://www.jstor.org/stable/41257966