Consumption Goods and Capital Goods

Transcript

We know that Final goods are goods which are used for consumption or investment Hence, Final goods is of 2 types Used for Consumption - These are called Consumption Goods Used for Investment - These are called Capital Goods DIFFERENT TYPES OF FINAL GOODS USED FOR FINAL CONSUMPTION USED FOR INVESTMENT Purchase of Goods by Customer for Use Purchase of Goods by Business to be used as Fixed Assets Example Computer Purchased by Customer to be used at home Example Computer Purchased by Office to be used by Employees These are also called Consumption Goods These are also called Capital Goods Difference between Consumption Goods and Capital Goods Consumption Goods It refers to those final goods which are used for final consumption Capital Goods It refers to those final goods which are used as Investment in Business Example Computer purchased for use at Home Example Computer purchased for use at Office They have Direct Demand (They satisfy human wants directly) They have Derived Demand (Their demand depends upon demand of other products) They do not increase Production Capacity They Increase Production Capacity Direct Demand and Derived Demand for Capital Goods and Consumption Goods CONSUMER GOODS Computer Shop Consumer Computer Here Computer is a Final Goods here Demand for Computer is Direct Demand of Consumer CAPITAL GOODS Computer Shop Software Company Consumer Computer Technical Service In this case Consumer has direct demand for Technical Service If Consumer demands more technical service Software Company will buy more computers So demand for computer is derived demand Difference between Direct and Derived Demand Direct Demand Demand of goods is not dependent upon other goods. Final goods have Direct demand (If final good is purchased directly by consumer) Derived Demand Demand of goods is dependent upon demand of other goods. Final goods have Derived demand (If final goods is not purchased directly by consumer) Also intermediate goods have Derived Demand NCERT Questions No questions in this part Other Books Q1 Consumption goods have ___ demand, while capital goods have ____ demand. Ans direct derived Q2 State true or false with reasons. 1 Ans FALSE Bread is not always a consumer good, it depends on the end use of bread. When it is purchased by a household, it is a consumer good. When it is purchased by a shop/ restraunt, it is a capital good.