Question

“Basis of classification of final goods into consumption and capital goods depend on the economic nature of its use.”
Defend or refute the statement, with the help of a suitable example.

Answer 1

• The given statement is defended. Consumption goods are those goods that directly satisfy the wants of the consumer whereas, capital goods are those final goods that are used for further production.
• A good can be considered as a consumption good or a capital good. It depends upon the economic nature of its use.
• For example, machinery purchased by a household can be classified as a consumption good whereas, if it is purchased by a firm for further production, then as a capital good