Consumer versus producer goods — What's the difference?

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    My question is simply this: for “Austrian Economics, Step by Step” on “Scope and Methods of Economics” under section three “Scope of Economics: Human Action” at around 17:45 the instructor states that one of the differences between producer goods and consumer goods is that the producer gets embedded into the good. The only example given is that steel used to make a fender for an automobile becomes embedded into the fender in that it becomes the fender. Power tools are producer goods but they’re not embedded into the good. What then is the difference between a producer and a consumer good if it isn’t only that a producer good is embedded?


    The difference between a consumer good and a producer good is that a consumer good satisfies a person’s end directly and a producer good satisfies a person’s end indirectly. A person can act with the consumer good to attain his end, but with producer goods he must use them to make a consumer good and then use the consumer good to attain his end.

    I believe I was making the point about producer goods becoming embedded in consumer goods in order to distinguish them from money. Money is neither a producer good nor a consumer good. Money is, however, a material good like other materials used as producer goods to make consumer goods. But, unlike them, money does not become embedded in the consumer goods. Plant and equipment and labor become embedded in consumer goods, at least in a metaphorical sense. One could say that “they are dissipated in production.” But the point is money retains its full physical integrity when a person uses it to make an exchange while producer goods are used up, fully in the case of materials and labor services and partially in the case of plant and equipment.

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