In economics, goods are considered as those commodities which are capable of satisfying human wants and desires. There is two primary classification of goods, i.e. consumer goods and capital goods. Consumer goods are defined as the goods that are used for final consumption, i.e. the goods are not used for further processing.
On the other hand, capital goods are those goods that are used for future production by the manufacturers, rather than by the consumers for final use. The line of demarcation amidst these two type of goods is very thin and blur. The only point that forms a base for the difference between consumer goods and capital goods is their use.
Content: Consumer Goods Vs Capital Goods
|Basis for Comparison||Consumer Goods||Capital Goods|
|Meaning||Goods that are used by the end user for consumption is called consumer goods.||Goods that are deployed to produce consumer goods is called capital goods.|
|Marketing||Business to Consumer||Business to Business|
|Purpose||Bought for personal consumption.||Bought for making other products.|
|Demand||Direct Demand||Derived Demand|
|Price determination||By suppliers||By companies|
|Meant for||Final Consumption||Final Investment|
Definition of Consumer Goods
Consumer goods, also known as final goods, are those tangible goods which are ready for consumption or purchased by individuals or households for final consumption to satisfy their wants. Consumer goods are further sub-divided into durable goods, nondurable goods and services.
Consumer goods include those products of our daily needs like food products (e.g. vegetable, eggs, cooking oil, grains, etc), household appliances, electronic items, furniture and cleaning products.
Definition of Capital Goods
Capital goods, alternately known as intermediate or producer goods, are the goods which are deployed by the organization as input in the production of consumer goods and services, such as plant and machinery, equipment, furniture, vehicles, office building.
The purchase of capital goods is an important expense for business as they require huge capital investment, whose benefit is received over the years. Moreover, these goods are depreciated over its life years and so, the business can claim partial tax deduction accordingly.
Key Differences Between Consumer Goods and Capital Goods
The significant differences between consumer goods and capital goods are discussed as under:
- Consumer goods are defined as the goods used by the end-user for consumption. Capital goods are goods deployed to produce consumer goods.
- Business to Consumer (B2C) marketing is used to sell consumer goods whereas the marketing strategy used to sell capital goods are Business to Business (B2B) marketing.
- Consumer goods are mainly bought for the purpose of personal consumption. On the contrary, capital goods are purchased with the objective of generating other products.
- Consumers buy consumer goods. As against this, the buyers of capital goods are manufacturers.
- As the consumer goods directly satisfy the needs of consumers, so they have a direct demand. As opposed, capital goods satisfy the consumer needs indirectly, so they have derived demand.
- Suppliers determine the price of consumer goods. Conversely, companies set the price of capital goods.
- While consumer goods are meant for final consumption, capital goods are concerned with final investment.
|Consumer Goods||Capital Goods|
|Mixer Grinder used by a household||Mixer Grinder used in a restaurant.|
|Car used for personal use||Cars used for providing taxi service|
|Personal Mobile phone||Office mobile phone for tele calling|
|Medicines kept in a household||Medicines stored in a medical store|
After reviewing the above points, it is quite clear that consumer goods are in many ways different from capital goods. Although if you look at the other side of the coin, you will come to know that capital goods and consumer goods both are same, it is only the purpose they are used for, makes them different.
To understand this, let’s take an example of mangoes, if the mangoes are purchased for consumption purposes, then it is said to be a consumer good. Conversely, if the purchase of mangoes is for making juice and then reselling it, then it is said to be a capital good.