Capital goods, which can also be seen as capital in economics, mainly refer to a storehouse of wealth or a mode of production and manufacturing.
Individuals, organizations, or governments use capital goods for the production of other goods or goods. Capital goods include: plants, machines, tools, equipment, and buildings used in the production of other consumer goods. Capital goods are not goods that can be consumed and consumed immediately; rather, capital goods are a class of goods that can be used to make other goods and services. Capital goods are a very important economic factor that plays a key role in how firms get their normal profits back from the products they sell. The concept of capital goods is often applied to manufacturing. Manufacturing companies provide consumers with a variety of functional products by using capital goods. These functional products may also be referred to as consumer goods. Capital goods and consumer goods have a linear relationship and constitute a boundary of production possibilities.
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Time :2022-05-19
Two characteristics of capital goods
1. Complementarity The complementarity of capital goods is an important part of the enterprise theory of modern Austrian economics and the basis of the concept of "cross-time complementarity" proposed by this school. Within the enterprise, the complementarity of capital goods is based on specificity, and the two appear simultaneously and are inseparable from each other. Specificity means that each capital good has its own specific function. Complementarity means that in a specific production process, capital goods with different functions cooperate and complement each other at different stages of production to complete production activities. This complementarity of capital goods does not arise naturally, but arises only when they are integrated into a particular production process and interact with each other.The complementarity of the goods of capital reflects the interdependence of specific capital at different nodes in the production chain, and at the same time, it must also be adapted to the production plans formulated by the entrepreneur. According to Rahman, the role of the entrepreneur is to decide what kind of capital resources the enterprise should have and to decide on its specific form. The production process is determined by the enterprise, the purpose of which is to maximize the use of these complementary capital goods... 2. Liquidity Since capital goods are used across periods, the optimal combination of capital chosen by the entrepreneur in the previous period will become less optimal over time and changes in the environment. The unanticipated changes provide new opportunities for capital use and make it possible to convert previously optimal uses. Both the complementarity and substitution of capital goods reflect the subjective process of enterprise decision-makers: complementarity refers to the role of each capital product arranged by the plan executed within different enterprises, while substitution reflects the adjustment of the production structure or the swap of roles of capital goods when expectations are wrong.The capital process will change from the most liquid currency to the illiquid raw materials, semi-finished products, finished products and machinery, so that once the corporate plan is implemented, it is difficult to modify. Therefore, the business theory of modern Austrian economics mainly studies the fact that corporate behavior needs to be coordinated in advance, and explores the feasible ways and organizational conditions for capital to complement each other over time...
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