Basic concepts in macroeconomics

 CONSUMPTION GOODS:- Consumer goods are products bought for consumption by the average consumer. Alternatively called final goods , Consumer goods are the end result of production and manufacturing . Clothing, food and jewellery are all examples of consumer goods.

From an economic point of view, consumer goods can be classified as durable (useful for longer than three years) , nondurable (useful for less than three years ), or pure services  (consumed instantaneously as they are produced).

For marketing purposes, consumer goods can be grouped into different categories based on consumer behaviour, how consumers shop for them , and how frequently consumer shop for them.

CAPITAL GOODS:- These are physical assets that a company uses in the production process to manufacture products and services that consumers will later use. Capital goods include buildings, machinery, equipment, vehicles and tools. Capital goods are not finished goods instead they are used to make finished goods.

Capital goods are also produced for the service sector including hair clippers used by hair stylists and coffee machines for coffee shops.

FINAL GOODS:- Final goods refer to those goods which areare u either for consumption or for investment . They are ready for use in the sense that no value has to be added to them. They have crossed  the production boundary. For example, milk purchased by the household for consumption.

INTERMEDIATE GOODS:- An intermediate good is a product used to produce a final good or finished pproduct.These are sold between industries for resale or the production of other goods. These goods are also called semi-finished products because they are used as inputs to become part of the finished product.

When calculating GDP, economist use the value-added approach with intermediate goods to guarantee that they are not counted twice.

STOCKS AND FLOWS:- Stock variables describe the state of the economy at a given point in time, whereas flow variables describe the changes in the economy over a period of time. If one looks at an extremely small period of time, flows will be close to zero whereas stocks could have any value. Stocks are accumulated or depleted over time by flows, whereas flows represent the rate of movement of items in and out of stocks. Frequently stocks are characterized by nouns and flows represent verbs.

GROSS INVESTMENT:- The total addition made to the capital stock of economy in a given period is termed as gross investment. Capital stock consists of fixed assets and unsold stock. So gross investment is the expenditure on purchase of fixed assets and unsold stock during the accounting year.

DEPRECIATION:- Depreciation refers to a fall in the value of fixed assets due to normal wear and tear, passage of time or expected obsolescence. The concept of depreciation is very important to differentiate between gross value and the net value, gross is inclusive of depreciation, whereas ,net excludes it.

Gross value= Net value + depreciation