Economy Simplified: Learn about these terms- Consumer Goods, Capital Goods and Intermediate Goods and Final Goods

What are Consumer Goods?

Goods like food and clothing, and services like recreation that are consumed when purchased by their ultimate consumers are called consumption goods or consumer goods.
We may note here that some commodities like television sets, automobiles or home computers, although they are for ultimate consumption, have one characteristic in common with capital goods – they are also durable. They also undergo wear and tear with gradual use and often need repairs and replacements of parts, i.e., like machines they also need to be preserved, maintained and renewed. That is why we call these goods consumer durables.

What are Capital Goods?

These are tools, implements and machines. While they make production of other commodities feasible, they themselves don’t get transformed in the production process. They are also final goods yet they are not final goods to be ultimately consumed. They are of durable character and they are a crucial backbone of any production process.

What are Intermediate Goods?

Of the total production taking place in the economy a large number of products don’t end up in final consumption and are not capital goods either. Such goods may be used by other producers as material inputs. Examples are steel sheets used for making automobiles and copper used for making utensils. They are mostly used as raw material or inputs for production of other commodities. These are not final goods.

What do you mean by Final Good?

Each producer of commodities intends to sell her output. So from the smallest items like pins or buttons to the largest ones like airplanes, automobiles, giant machinery or any saleable service like that of the doctor, the lawyer or the financial consultant – the goods and services produced are to be sold to the consumers. 
The consumer may, in turn, be an individual or an enterprise and the goods or services purchased by that entity might be for final use or for use in further production. When it is used in further production it often loses its characteristic as that specific good and is transformed through a productive process into another good. 
Thus a farmer producing cotton sells it to a spinning mill where the raw cotton undergoes transformation to yarn; the yarn is, in turn, sold to a textile mill where, through the productive process, it is transformed into cloth; the cloth is, in turn, transformed through another productive process into an article of clothing which is then read  to be sold finally to the consumers for final use. Such an item that is meant for final use and will not pass through any more stages of production or transformations is called a final good.
Why do we call this a final good?

 Because once it has been sold it passes out of the active economic flow, it will not undergo any further transformation at the hands of any producer.

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