Question

6. Distinguish between productive capital and
consumption capital. ​

Answer 1

Answer:

Capital goods are goods used by one business to help another business produce consumer goods. Consumer goods are used by consumers and have no future productive use. Capital goods include items like buildings, machinery and tools. Examples of consumer goods include food, appliances, clothing and automobiles

Answer 2

Answer:

The same physical good could be either a consumer or capital good, depending on how the good is used. An apple bought at a grocery store and immediately eaten is a consumer good. An identical apple bought by a company to make apple juice is a capital good. The difference lies in the apple's utilization.

KEY TAKEAWAYS

Capital goods are goods used by one business to help another business produce consumer goods.

Consumer goods are used by consumers and have no future productive use.

Capital goods include items like buildings, machinery and tools.

Examples of consumer goods include food, appliances, clothing and automobiles.

Capital Goods

Capital goods are any tangible asset used by one business to produce goods or services that then become an input for other businesses to produce consumer goods. They are also known as intermediate goods, durable goods or economic capital. The most common capital goods are property, plant, and equipment (PPE), or fixed assets such as buildings, machinery and equipment, tools and vehicles.