Capital goods - Definition and Overview

In economics, capital goods refer to real products that are used in the production of other products but are not incorporated into the new product (these are termed Consumer Goods). They are often called fixed human-made means of production. Capital goods include factories, machinery, tools, and other buildings. They are different from raw materials which are used up in the production of goods.

Capital goods are different from financial capital. Whereas capital goods are real objects owned by individuals, governments, and other organizations in order to get a positive return of some sort from production, financial capital refers to pieces of paper (or other kinds of promises) that represent claims on these types of goods and on other sources of promised future income.