Capital Goods
Any kind of good that a company has in its hands during the starting of business can be called as Capital Goods. But those goods should have a physical presence, more durable and must not wear out in its life time. Capital good can be acquired by saving wealth which will be a good investment during production phase.
It is a tangible asset in economics, which means an asset with a physical existence like land, machine etc. It is also called a ‘complex products and systems (CoPS)’.
Its Importance
Capital goods plays a crucial role in the today’s society and economy. Let us use an example to understand its importance. Consider you are setting up a factory which uses an important machinery which is automatic but very expensive. So if you cannot afford it you will go with an alternate way which will be either labor intensive method or costly way which will drastically reduce your profit. So if you had that automatic machinery in hand it would have been your capital good.
Does it influence the business?
Yes it does. In industries capital good can be a deciding factor which will predict the business growth. For example if a company had an automatic baking oven as capital good they must turn into bread and cake production, because other competitors in market are small where they use labor intense method. By this was company can make huge profits.
