Understanding Economic Assets

Consumer goods provide immediate and direct satisfaction. For example, a person needs food and drink. Means of production directly satisfy needs and are useful in producing consumer goods. For example, to produce consumer goods like clothing, you need means of production like wool and sewing machines.

Nondurable goods are used only once and consumed in that application, such as food. Durable goods can be used repeatedly. They wear down with use, such as clothes or a car. Capital goods are durable and used for production and consumption.

Raw Materials and Finished Goods

A finished product is suitable to meet needs, such as edible fruits. A raw material is used as the initial element of a process, such as wood, wool, or cotton. Semi-finished products are not suitable to meet needs and should undergo further processing. For example, in the paper industry, wood pulp is a raw material, chemical pulp is a semi-finished product, and milled paper is the finished product.

Input Goods

Input goods require further processing in final production. They lose their identity and become other goods. For example, in the textile industry, yarn (input) is used to manufacture fabrics (intermediate goods), which are then used to make clothes.

Primary goods are raw materials provided by nature.

Intermediate goods are produced by one company and serve as input for other companies, production facilities, or components of other products.

Final Goods

Final goods do not need further elaboration and serve for consumption or as a means of production.

Additional Assets

Complementary goods are used to meet the need of consumption or production of other goods. For example, to learn to write, you need a pencil and paper (complements).

Substitute Goods

Substitute goods can replace others in meeting a need or in the production of other goods. For example, to eat protein, you can choose chicken, beef, or eggs (substitutes).

Income Property

Income property satisfies needs. The concept of utility is a subjective assessment that each person gives to the goods that satisfy their needs and is the dominant factor in consumer decisions.

Value of Assets

The value of assets comes from a comparison of two properties, usually money. Something that is abundant and easily achieved has no economic value. This relates to real economic value. The value of use is the comfort level that people get from the satisfaction of their needs. Exchange value arises from the objective comparison of goods that can be exchanged. Nobody would be willing to part with a useful good to exchange it for one that is useless.