Question

Statement (1): Capital goods are used by producers.

Statement (2): Salt used by baker is a capital good.

Options

• Both statements are true.

• Both statements are false.

• Statement 1 is true, Statement 2 is false.

• Statement 2 is true, Statement 1 is false.

Answer 1

Statement 1 is true, Statement 2 is false.

Explanation:

• Statement 1: This is true because capital goods are man-made goods like machinery, tools and equipment used in the production of other goods.
• Statement 2: This is false. Salt used by a baker is an intermediate good, not a capital good. It is consumed in the production process of making bread and does not assist in further production like capital goods. Thus, salt is an intermediate good, not capital goods.