(a) What are capital goods. (b) Explain the problems associated with the distribution of goods in your country.

Answer Details

(a) Capital goods are man-made goods that are not wanted for their own sake but are used to produce other goods and services. They are producer goods such as machinery, tools, factory buildings, equipment and raw materials. Unlike consumer goods, they satisfy wants indirectly by aiding further production.

(b) Problems associated with the distribution of goods:

• Poor transport network: Bad roads, few railways and inadequate transport raise costs and delay the movement of goods from producers to consumers, and cause spoilage of perishables.
• Inadequate storage and warehousing facilities: Lack of good storage leads to wastage, hoarding and seasonal scarcity.
• Too many middlemen: A long chain of intermediaries widens the gap between producer and consumer prices and increases the final price paid by consumers.
• Inadequate market information and communication: Producers and buyers lack information on prices and supply, leading to gluts in one area and scarcity in another.
• Insufficient capital and hoarding/adulteration: Distributors may lack funds to hold stock, and dishonest practices such as hoarding to create artificial scarcity distort distribution. (Insecurity and multiple taxes on the roads also hamper distribution.)