A capital is a durable good that is used in production of goods or services. Capital goods are acquired by a society by saving wealth which can be invested in the means of production.
Individuals, organizations and governments use capital goods in the production of other goods or commodities. Capital goods include factories, machinery, tools, equipment, and various buildings which are used to produce other products for consumption. Capital goods, then, are products which are not produced for immediate consumption; rather, they are objects that are used to produce other goods and services. These types of goods are important economic factors because they are the key to developing a positive return from manufacturing other products and commodities.
Manufacturing companies also use capital goods. Capital goods help their company make functional goods to sell individuals valuable services. As a result, capital goods are sometimes referred to as producers’ goods or means of production. An important distinction should also be made between capital goods and consumer goods, which are products directly purchased by consumers for personal or household use.
For example, cars are generally considered consumer goods because they are usually bought by an individual for personal use. Dump trucks, however, are usually considered capital goods, because they are used by construction and manufacturing companies to haul various materials in order to make other products such as roads, bridges, dams, and buildings. A chocolate bar is a consumer good, but the machines used to produce the chocolate bar are considered capital goods.
Capital goods are generally man-made. Natural resources such as land or minerals, or human capital—the intellectual and physical skills and labor provided by human workers—are not capital goods.
The economic term 'capital goods' is not to be confused with the financial or accounting usage of 'capital', which may mean simply wealth or financial capital.
