Q6Managerial Economics & Financial Accounting
Question
2 marks
Distinguish between consumer goods and capital goods. Which of these are final goods?
Answer
Consumer goods satisfy household wants directly; capital goods are used by businesses to produce other goods. Both are considered final goods.
- Consumer Goods: Goods purchased by end consumers (households) for direct consumption and satisfaction of wants (e.g., bread, clothing).
- Capital Goods: Goods purchased by businesses to be used in the production of other goods over a long period (e.g., machinery, factory buildings).
- Final Goods: Interestingly, both are considered final goods in national income accounting because neither is resold or used as a raw material for further transformation within the same year.