(a) Define consumer goods. (b) Explain the following forms of capital with an example each: i. fixed capital ii. social capital iii. circulating capital (c)...

(a) Consumer goods. Consumer goods are goods produced for direct final use and satisfaction by consumers, not for producing other goods. Examples are food, clothing, and a television set used at home. They may be durable (a car) or non-durable (bread).

(b) Forms of capital.

• Fixed capital. Durable producer goods that are used again and again in production over a long period without being used up in a single act of production. Example: machinery, factory buildings, tractors.
• Social capital. Capital assets provided mainly by the government for the benefit of the whole community rather than a single firm; also called social overhead capital or infrastructure. Example: roads, schools, hospitals, water and electricity supply.
• Circulating (working) capital. Capital that is used up or transformed in a single round of production and must be replaced each time. Example: raw materials, fuel, and money for wages.

(c) Three reasons for a low level of savings in a country.

• Low income. Most people earn little and spend nearly all of it on necessities, leaving little to save.
• High propensity to consume / large family size. Heavy consumption needs and dependants reduce what can be set aside.
• Lack of adequate banking and saving facilities, especially in rural areas, so people have few safe places to keep savings.
• Inflation. Rising prices erode the value of money saved and discourage saving.
• Low interest rates offering little reward for saving.

Examination takeaway. Distinguish the three capitals by how they are used: fixed capital lasts through many rounds of production, circulating capital is used up in one round, and social capital is community infrastructure provided mainly by government.