Capital which is one of the factors of production is the stock of previous wealth invested in order to obtain future wealth.
Capital is also define as wealth in the form of money or other assets owned by a person or organization or available or contributed for a particular purpose such as starting a company or investing.
Also,capital is one of Factors of production that are used to create goods or services and are not themselves in the process.
Capital may be tools or equipment that make the production of goods and services possible.
Characteristics of capital
1. Capital could either be in physical or liquid form.
2. The physical capital includes tangible assets such as buildings, motor vehicles, machines etc.
3. Liquid capital is in form of money which can easily be converted into physical capital.
4. Capital is highly durable
5. Capital is a man made factor of production.
6. Capital is subject to depreciation
7. Capital aids large scale production and division of labour.
Types of capital
1. Fixed capital: These are durable assets that can last for a very long time and are required in the production process. Examples include, machineries, buildings, motor vehicles, furniture etc.
2. Working or circulating capital: this type of capital includes raw, cash in hand that can easily be converted into final goods.
3. Current capital: this is the capital that is required for the day to day running of a firm or production activities.
4. Real or social capital: this type of capital comprises all the social amenities such as road, electricity and water provided by the government which aid production of goods and services
Efficiency of capital
Capital efficiency has to do with the possibility of capital to lead to higher output than it would have been possible without the availability of such capital.
Marginal efficiency of capital
This refers to the rate of return on the cost unit of capital invested in the production process. It shows the increase in output as a result of the last unit of capital invested.
Importance of marginal efficiency of capital
1. It makes it possible for a rational decision to be taken on capital accumulation.
2. It provides direction to production in terms of employment of more capital.
Capital is also define as wealth in the form of money or other assets owned by a person or organization or available or contributed for a particular purpose such as starting a company or investing.
Capital may be tools or equipment that make the production of goods and services possible.
Characteristics of capital
1. Capital could either be in physical or liquid form.
2. The physical capital includes tangible assets such as buildings, motor vehicles, machines etc.
3. Liquid capital is in form of money which can easily be converted into physical capital.
4. Capital is highly durable
5. Capital is a man made factor of production.
6. Capital is subject to depreciation
7. Capital aids large scale production and division of labour.
1. Fixed capital: These are durable assets that can last for a very long time and are required in the production process. Examples include, machineries, buildings, motor vehicles, furniture etc.
2. Working or circulating capital: this type of capital includes raw, cash in hand that can easily be converted into final goods.
3. Current capital: this is the capital that is required for the day to day running of a firm or production activities.
4. Real or social capital: this type of capital comprises all the social amenities such as road, electricity and water provided by the government which aid production of goods and services
Efficiency of capital
Capital efficiency has to do with the possibility of capital to lead to higher output than it would have been possible without the availability of such capital.
Marginal efficiency of capital
This refers to the rate of return on the cost unit of capital invested in the production process. It shows the increase in output as a result of the last unit of capital invested.
Importance of marginal efficiency of capital
1. It makes it possible for a rational decision to be taken on capital accumulation.
2. It provides direction to production in terms of employment of more capital.