What are capital goods?

Capital goods refer specifically to the assets and equipment utilized in the production of goods and services, rather than being consumed directly by consumers. These goods play a critical role in the production process; they enable businesses to create products and deliver services efficiently and effectively. Examples of capital goods include machinery, buildings, tools, and equipment that contribute to production capacity.

In contrast to products consumed by end-users, capital goods are not intended for final consumption but rather are used to produce consumer goods. Similarly, raw materials are the inputs used in the production process that will ultimately be transformed into finished goods, but they do not encompass the machinery or equipment required to facilitate the manufacturing process. Financial instruments utilized for trading are distinct from physical goods altogether, focusing instead on economic activities related to investments and stocks. Thus, the identification of capital goods as essential resources in production highlights their importance in a functioning economy.