Which of the following goods undergo wear and tear, thus gradually replaced over time?
Which of the following goods undergo wear and tear, thus gradually replaced over time?
Solution
Option 1: Capital Goods -> These are durable assets used in production like machinery and equipment that depreciate over time.
Option 2: Consumer Goods -> These are final goods for personal consumption, including both durable and non-durable items.
Option 3: Intermediate Goods -> These are inputs used in production and are consumed/transformed rather than worn out gradually.
Option 4: Giffen Goods -> These are inferior goods with unusual demand behavior, not related to wear and tear.
Hence, Option 1: Capital Goods -> Capital goods such as machinery, equipment, buildings, and vehicles used in production undergo continuous wear and tear through regular use. This physical deterioration is called depreciation. Unlike intermediate goods that are consumed in production or consumer goods meant for final use, capital goods are specifically characterized by their gradual loss of value over time, requiring systematic replacement to maintain productive capacity. This replacement process is a key consideration in business investment and economic planning. -> correct
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2023: 29 May Shift 2