The correct option is 1 and 3 only.
Explanation
In economics, goods are broadly classified into final goods and intermediate goods. Final goods are further categorized into consumption goods and capital goods. Capital goods are physical assets used by industries to produce other goods and services over an extended period.
Statement-wise Analysis:
- Statement 1 is Correct: Capital goods are durable goods (e.g., machinery, tools, buildings) used in the production process. Unlike raw materials, they do not get transformed or merged into the final product; rather, they facilitate the production process while retaining their identity.
- Statement 2 is Incorrect: Capital goods are classified as final goods, not intermediate goods. Intermediate goods are those used up completely in the production process (like raw materials) or purchased for resale within the same year. Capital goods are purchased for investment purposes and are used repeatedly over several production cycles.
- Statement 3 is Correct: Since capital goods are used repeatedly over a long period, they undergo wear and tear, lose value over time, or become obsolete. This loss of value is technically known as depreciation or consumption of fixed capital.
Key Takeaway:
Capital goods are final producer goods that are durable and subject to depreciation. They are distinct from intermediate goods because they are not consumed in a single act of production.