Differences Between Consumer Goods and Capital Goods
The primary difference between consumer goods and capital goods is their usage. Capital goods are the factors used to produce intermediate goods, which are again used by the manufactures to produce the final products. On the other hand, the consumer goods themselves are the final products that are used by the end-users for their personal consumption. In short, it can be said that capital goods come ahead of consumer goods in the same value chain.
- Capital goods are tangible assets such as property, plant, and equipment used by businesses to produce the final consumer goods. On the other hand, consumer goods are final products like food, clothes, vehicles, electronic appliances purchased by end-users for consumption, or their intended usage.
- Consumer goods are low-priced items compared to capital goods, which involve an investment of a large sum of money.
- Given the financial outlay, the benefits of capital goods are received over a longer period than consumer goods.
What is Consumer Goods?
The term “consumer goods” refers to the goods that are purchased for consumption by the end-users. These goods can’t be processed further to produce any other goods, and thus consumer goods are also popularly known as final goods given that they end up in the hands of the intended end-users. It is to be noted that although it says consumer goods, the definition of consumer goods also includes services given that services are intangible products consumed by the consumers. In other words, consumer goods are any goods and services that directly satisfy the consumers’ needs and wants. Some of the most common examples of consumer goods are food, clothes, vehicles, electronic appliances, etc. Consumer goods can be further classified into durable and nondurable goods.
What is Capital Goods?
The term “capital goods” refers to the tangible assetsTangible AssetsAny physical assets owned by a firm that can be quantified with reasonable ease and are used to carry out its business activities are defined as tangible assets. For example, a company's land, as well as any structures erected on it, furniture, machinery, and equipment. used by the businesses to produce goods or services, which eventually become the raw material or input for producing the final consumer goods. Hence, capital goods are also popularly known as intermediate goods. The purchase of capital goods requires a large amount of investment, and thus, it is considered an important business decision. Moreover, the benefits of capital goods are received over time, so the value of these goods is depreciated over their useful lifeUseful LifeUseful life is the estimated time period for which the asset is expected to be functional and can be put to use for the company’s core operations. It serves as an important input for calculating depreciation for assets which affects the profitability and carrying value of the assets.. Some of the most common examples of capital goods are fixed assetsFixed AssetsFixed assets are assets that are held for the long term and are not expected to be converted into cash in a short period of time. Plant and machinery, land and buildings, furniture, computers, copyright, and vehicles are all examples., such as buildings, property, plant, equipmentProperty, Plant, EquipmentProperty plant and equipment (PP&E) refers to the fixed tangible assets used in business operations by the company for an extended period or many years. Such non-current assets are not purchased frequently, neither these are readily convertible into cash. (PP&E), tools, etc.
Consumer Goods vs Capital Goods Infographics
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Comparative Table – Consumer Goods vs Capital Goods
|Particulars||Consumer Goods||Capital Goods|
|Definition||The end-users use these goods for their own consumption.||These goods are deployed in the production of the final goods.|
|End-user||End-market consumers directly purchase these goods.||Businesses or manufacturers buy these goods.|
|Marketing strategy||Given the end-market, business to consumer (B2C) marketing is used to sell these goods.||Given the end-market, business to business (B2B) marketing is used to sell these goods.|
|Purpose||These goods are mainly purchased for personal consumption.||These goods are purchased for manufacturing other products.|
|Demand||These goods have direct demand as they directly satisfy the needs and wants of the consumers.||These goods have derived demand as they satisfy the needs and wants of the consumers indirectly.|
|Price||These goods are usually cheaper in terms of price. However, the prices vary a lot depending on the market demand.||These goods involve an investment of a large sum of money. But the prices are stable as the market demand is not that high.|
|Benefits||The benefits derived from these goods are generally short-lived and thus doesn’t involve any depreciation.||The benefits of these goods are derived over a period of time, and thus these goods are depreciated accordingly.|
This has been a guide to Consumer Goods vs Capital Goods. Here we discuss the top similarities and differences between the two along with infographics. You may also have a look at the following useful articles –