Home » Business » Difference Between Consumer Goods and Capital Goods (With Table)

Difference Between Consumer Goods and Capital Goods (With Table)

Consumer Goods vs Capital Goods

The key difference between Consumer Goods and Capital Goods lies in the fact that consumer goods are the goods that are used by consumers and do not have any future productive use, while capital goods are the goods that are used by one business to create products that can be used by another business to create consumer goods.

Examples of consumer goods are clothing, vehicle, and food and examples of capital goods are machinery, property, and tools.

In economics, goods are things that can satisfy human needs and desires. Primarily in modern economics, there are 2 types of goods: Consumer goods and Capital goods.

Consumer goods are defined as consumable goods which do not need further processing. The consumers are also able to use or consume these goods immediately.

For example: snacks, bread, mineral water, toothpaste, shampoo, coffee, cookies, tea and many more.

Capital goods are those goods that need further processing and usually go to production from manufacturers.

They usually come in massive quantities and examples include commodities such as wood, log, gold, and half-raw materials. People usually store them in inventory or warehouse as stock for further processing or investment.

The core and only point of difference between Consumer goods and Capital goods is their use.

Example of manufacturer brands which produce Consumers goods is Indofood, Wings, ITC, Orang Tua, Unilever, Lions, Coca-Cola and many more.

They produce goods that are commonly used by the majority of people. The consumer goods from these companies include items like candies, wafers, toothpaste, sweet water, soap, cigarette, ready to eat food.

In the modern era, many manufacturers now innovate and change their category into fast-moving consumer goods, because the cycle from consumers, production and delivery is indeed fast.

The marketing team sets sales strategies by cooperating with retailers and wholesalers to make their products available and reachable for everyone.

While for Capital goods, we cannot consume them directly, they need to be processed by the manufacturer before they become consumable.

The example of the manufacturers includes rail-way companies, property developers, woodworking factories, oil and gas companies, and most likely state-owned companies.


 

Comparison Table Between Consumer Goods and Capital Goods (in Tabular Form)

Parameters of ComparisonConsumer GoodsCapital Goods
MeaningGoods consumed by an end-userGoods processed to produce consumer goods
MarketingBusiness to consumerBusiness to business
PurposeBought for personal consumptionBought for making other product or finish product
BuyerConsumersManufacturers
DemandHighLess
Storage or SavingHome storage (refrigerator, desk, kitchen)Warehouse, inventory

 

What are Consumer Goods?

In Economics, every tangible product or commodity that is produced to satisfy and fulfill market needs is called Consumer goods.

It could also be classified into three types such as durable goods, nondurable goods, and services.

Durable goods are usually having a significant life span, often three years or more like a battery, remote control, furniture, and most likely electronics.

While non-durable goods will expire in a matter of months to 1 year such as food and beverages, clothes, soap, and things that house-chores need.

Some people may think that services are not part of consumer goods but that is not true. Consumer-facing services are intangible products or actions consumed simultaneously.

The examples of these include haircuts, auto repair, landscaping, sales-marketing, and home or web designing.

Examples of Consumer Goods
 

What are Capital Goods?

Meanwhile, Consumer goods end after delivery to end-user, Capital goods still need to be processed before they can be used. The user of capital goods is usually the other companies that later will produce consumer goods (this is what we called business to business B2B).

There are 3 types of Capital goods: Property, Plant, and Equipment (fixed asset).

The examples of Capital goods are buildings, factories, machinery, vehicles, etc. And examples of Capital goods used for a service business are hair masks used by hairstylists, a computer used by a web designer, etc.

Like Consumer goods, capital goods are also classified as a tangible asset, because they could be measured, have monetary value, and usually have a physical form.

Examples of Capital Goods

Main Differences Between Consumer Goods and Capital Goods

Usage and consumption

The main differences between these 2 types of goods are in its use. Consumer goods could be directly used without any further process yet Capital goods need more processing.

Although both products are produced to be used, they are produced for different purposes.

Capital goods are deployed by manufacturers to produce finished products that we call consumer goods, and consumer goods are usually used for daily or general consumption directly.

Saving and storage

The way of saving both of these goods is also different. Consumer goods are saved in refrigerator, cabin or desk and the capital goods are stored in inventory or warehouse.

RECOMMENDED  Difference Between Multilevel Marketing and Pyramid Scheme (With Table)

The storage amount of capital goods is most likely bigger than consumer goods.

Demand and pricing

Consumer goods are usually cheap and depend on market demand. Capital goods are costlier, but the price is more stable, because of lesser demand.


 

Frequently Asked Questions (FAQ) About Consumer Goods and Capital Goods

  1. What are the types of consumer goods?

    If talking from a company’s marketing point of view, consumer goods can be categorized into 4 types. These categories are based on the buying patterns of the consumers.

    They are as follows: Convenience goods – milk and tobacco. Shopping goods – TV. Specialty goods – jewelry and fur. Unsought goods – insurance.

  2. Why are capital goods important?

    If a country wants to flourish and become the leader in terms of trade, then capital goods are very important. They increase the long term productive capacity of the country’s economy.

    If capital goods are more, then it is possible that consumption is decreased in the short run, but the overall living standard will increase in the long run.

  3. What is the largest consumer goods company in the world?

    Overtaking its competitors at a much faster pace by mergers and acquisitions, NESTLE is the world’s largest consumer goods company acquiring the major portion of the global market share.

    The sales growth seen by Nestle in the past decade is much more than that of its competitors. It is ahead of PepsicO, Proctor and Gamble, AbInBev and Unilever.

  4. Where do consumer goods come from?

    As the term itself suggest, consumer goods are those which are consumed by the regular citizens and not by the industries and manufacturers.

    Big businesses and entrepreneurs invest their money and with the combination of machinery, raw material, manpower, and labor, produce consumer goods for the people and the economy.

  5. What are some examples of capital goods?

    All the tangible resources that are used in the process of producing or manufacturing other goods in the factories or warehouses are the capital goods.

    Some examples are as follows:
    Computers, hardware, machinery, construction tools, or any other tools that are being used in the process of manufacturing of goods and services.

  6. Are raw materials capital goods?

    All the tangible resources that are used in the process of producing or manufacturing other goods in the factories or warehouses are the capital goods.

    While raw material is the basic requirement to produce the goods and services which will further be sold to generate the revenue. Thus, raw materials don’t come under capital goods.

  7. What are the input and capital goods?

    Input goods are the ones that are used in the initial stage of the production of any commodity or product.

    While on the other hand, all the tangible resources that are used in the process of producing or manufacturing other goods in the factories or warehouses are capital goods.


 

Recommended Reading


 

Conclusion

Consumer goods and capital goods are two different things yet the final product comes in the hand of consumers.

Consumer goods in terms of chain flow and market are much higher than capital goods because of their usage and demand.

Consumer goods are easy to reach by consumers yet capital goods are meant to be processed first before consumed.

Consumer goods are tangible products that have the main use to satisfy current needs, while capital goods are not to be consumed directly but purchased to make other consumable products.

When it comes to durability, capital goods are having a longer life span and mostly become an investment while consumer goods are comparatively short because of personal use purposes.

In any economy, there are fluctuations that directly affect the market price and flow. Consumer goods usually follow the tides while capital goods are comparatively stable and tend to get higher by the time.


 

Word Cloud for Difference Between Consumer Goods and Capital Goods

The following is a collection of the most used terms in this article on Consumer Goods and Capital Goods. This should help in recalling related terms as used in this article at a later stage for you.

Word Cloud for Consumer Goods and Capital Goods

 

References

  1. https://link.springer.com/chapter/10.1007/978-1-349-81529-6_9
  2. https://academic.oup.com/oep/article-abstract/15/3/217/2360262
  3. https://www.ingentaconnect.com/content/mcb/007/1993/00000007/00000003/art00005