Capital good
Encyclopedia
A capital good, or simply capital
in economics
, is a manufactured
means of production
. Capital goods are acquired by a society by saving wealth which can be invested in the means of production.
Individuals, organizations and governments use capital goods in the production of other goods or commodities. Capital goods include factories, machinery, tools, equipment, and various buildings which are used to produce other products for consumption. Capital goods, then, are products which are not produced for immediate consumption; rather, they are objects that are used to produce other goods and services. These types of goods are important economic factors because they are key to developing a positive return from manufacturing other products and commodities.
Manufacturing companies also use capital goods. Capital goods help their company make functional goods to sell individuals valuable services. As a result, capital goods are sometimes referred to as producers’ goods or means of production. An important distinction should also be made between capital goods and consumer goods, which are products directly purchased by consumers for personal or household use.
For example, cars are generally considered consumer goods because they are usually bought by an individual for personal use. Dump trucks, however, are usually considered capital goods, because they are used by construction and manufacturing companies to haul various materials in order to make other products such as roads, bridges, dams, and buildings. A chocolate bar is a consumer good, but the machines used to produce the chocolate bar are considered capital goods.
Capital goods are generally man-made. Natural resources
such as land or minerals, or human capital
—the intellectual and physical skills and labor provided by human workers—are not capital goods.
The economic term 'capital goods' is not to be confused with the financial or accounting usage of 'capital', which may mean simply wealth
or financial capital
.
Capital (economics)
In economics, capital, capital goods, or real capital refers to already-produced durable goods used in production of goods or services. The capital goods are not significantly consumed, though they may depreciate in the production process...
in economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
, is a manufactured
Manufacturing
Manufacturing is the use of machines, tools and labor to produce goods for use or sale. The term may refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale...
means of production
Means of production
Means of production refers to physical, non-human inputs used in production—the factories, machines, and tools used to produce wealth — along with both infrastructural capital and natural capital. This includes the classical factors of production minus financial capital and minus human capital...
. Capital goods are acquired by a society by saving wealth which can be invested in the means of production.
Individuals, organizations and governments use capital goods in the production of other goods or commodities. Capital goods include factories, machinery, tools, equipment, and various buildings which are used to produce other products for consumption. Capital goods, then, are products which are not produced for immediate consumption; rather, they are objects that are used to produce other goods and services. These types of goods are important economic factors because they are key to developing a positive return from manufacturing other products and commodities.
Manufacturing companies also use capital goods. Capital goods help their company make functional goods to sell individuals valuable services. As a result, capital goods are sometimes referred to as producers’ goods or means of production. An important distinction should also be made between capital goods and consumer goods, which are products directly purchased by consumers for personal or household use.
For example, cars are generally considered consumer goods because they are usually bought by an individual for personal use. Dump trucks, however, are usually considered capital goods, because they are used by construction and manufacturing companies to haul various materials in order to make other products such as roads, bridges, dams, and buildings. A chocolate bar is a consumer good, but the machines used to produce the chocolate bar are considered capital goods.
Capital goods are generally man-made. Natural resources
Natural Resources
Natural Resources is a soul album released by Motown girl group Martha Reeves and the Vandellas in 1970 on the Gordy label. The album is significant for the Vietnam War ballad "I Should Be Proud" and the slow jam, "Love Guess Who"...
such as land or minerals, or human capital
Human capital
Human capitalis the stock of competencies, knowledge and personality attributes embodied in the ability to perform labor so as to produce economic value. It is the attributes gained by a worker through education and experience...
—the intellectual and physical skills and labor provided by human workers—are not capital goods.
The economic term 'capital goods' is not to be confused with the financial or accounting usage of 'capital', which may mean simply wealth
Wealth
Wealth is the abundance of valuable resources or material possessions. The word wealth is derived from the old English wela, which is from an Indo-European word stem...
or financial capital
Financial capital
Financial capital can refer to money used by entrepreneurs and businesses to buy what they need to make their products or provide their services or to that sector of the economy based on its operation, i.e. retail, corporate, investment banking, etc....
.
External links
- Capital Goods and Services, University of North CarolinaUniversity of North CarolinaChartered in 1789, the University of North Carolina was one of the first public universities in the United States and the only one to graduate students in the eighteenth century...