A consumer good is an item produced for the direct use by end consumers. Consumer goods are also referred to as final goods.
Consumer goods include household items such as food, gasoline, clothing, and televisions. They are also referred to as final goods because they are ultimately used by the end consumer. Consumer goods can be categorized as durable or non-durable. Food and gasoline fall into the non-durable category as they are typically used up within three years, while clothing and televisions are considered durable as they last longer than three years.
Distinguishing between consumer, intermediate, and capital goods is important when measuring an economy’s gross domestic product (GDP). Intermediate goods are inputs in a product. For example, cotton is an intermediate good when it is used as material in a shirt. Similarly, milk is an intermediate good when it is used to make ice cream; however, if purchased for direct consumption, it is classified as a consumer good. Economists exclude intermediate goods when calculating the GDP to avoid double counting. If included, the GDP would be overstated because the value of the intermediate goods would be counted twice: once as an intermediate good and again in the final product.
Resold consumer goods, such as used cars or furniture, are also not factored into consumer spending, even if the second user is the final consumer. These items were included in GDP when sold as new, and including them a second time would inflate the reported economic production.
Equipment used in producing goods, such as machinery for building furniture, is not classified as a consumer good. Economists categorize these items as capital goods when used to provide other goods and services.
A product can be both a consumer and a capital good. The categorization depends on the product’s use. When deciding if a good is a capital or a consumer good, ask, “Is this product used in producing a good or service?” If the answer is “Yes,” it is a capital good. For example, a pickup truck can be either a capital or consumer good. If used by a builder to transport material to construct homes, the truck is a capital good. When the truck is the household vehicle, it is a consumer good. Other examples of goods that could be either capital or consumer goods include personal computers, iPods, ovens, and microwaves.
Capital and Consumer Goods – How They Influence Productivity
Demand – The Consumer's Perspective
Gross Domestic Product – Measuring An Economy’s Performance
Production Possibilities Frontier
