(a) Define consumer goods.
(b) Explain the following forms of capital with an example each:
i. fixed capital
ii. social capital
iii. circulating capital
(c) Outline three reasons for the low level of savings in a country
Explanation
(a) Consumer goods are goods produced for the direct satisfaction of the wants of an individual.
(b)) Fixed capital: These are long-term assets of a firm that are very durable and are not used up in the course of production. they do not change their form as well, e.g. land, Buildings., Machinery, equipment tools, motor vehicles, etc.
i. Social capital:-This refers to capital that is collectively owned by society but is provided by the government. It is also called social infrastructure, e.g. roads, electricity, hospitals, schools, Water rail system, etc
ii. Circulating capital: This form of capital changes its form and is used up in the production process, e.g.stock of partly-finished goods, fuel, raw materials money for paying wages and salaries, etc.
(c) i. The income level is generally low and so most people cannot afford to save.
ii. The dependency ratio is high because the Working group is smaller compared to the youth and the aged.
iii. Most people have the tendency to consume rather than to save, engaging in prestigious but non-productive ventures, e.g. funerals, parties, weddings, etc
iv. There is little incentive to save since the interest rate on savings is low and also most institutions finally wind up, taking along customers savings with them.
v. The cost of living is high because prices of goods and services keep rising People are therefore left with nothing to save.
vi. The demand by banks is sometimes cumbersome because large initial deposits are required and other information that clients cannot provide.
vii Government tax policy; if the tax is high it reduces disposable income and makes savings low.
viii High levels of unemployment
ix. Inadequate financial institutions, especially in the rural area to mobilize savings.