capital

Examples of capital in the following topics:

• Defining Capital

  • In economics, capital (also referred to as capital goods, real capital, or capital assets) references non-financial assets used in the production of goods and services.
  • It is possible for capital goods to be maintained or regenerated depending on the type of capital.
  • Physical Capital: capital that must be produced by human labor before it can become a factor of production (also referred to as manufactured capital).
  • Interest allows capital to be obtained, while profit is the accumulation of the capital.
  • Social Capital is capital that is captured as goodwill or brand value.

• Capital and Technology

  • Firms add capital to the point where the value of marginal product of capital is equal to the rental rate of capital.
  • Capital is a factor of production, along with labor and land.
  • It can be used to derive the marginal product for capital, which is the increase in the amount of output from an additional unit of capital.
  • The value of marginal product (VMP) of capital is the marginal product of capital multiplied by price.
  • Firms will increase the quantity of capital hired to the point where the value of marginal product of capital is equal to the rental rate of capital.

• Cost of capital

  • The cost of capital is the rate companies must pay to finance a project.
  • The cost of capital refers to the cost of the money used to pay for the capital.
  • The cost of capital is used to evaluate a company's new projects.
  • In order for an investment to be worthwhile, the expected return on capital has to be higher than the cost of capital.
  • One way of combining the cost of debt and equity to generate a single cost of capital number is through the weighted-average cost of capital (WACC).

• The Capital Account

  • The capital account acts as a sort of miscellaneous account, measuring non-produced and non-financial assets, as well as capital transfers.
  • There are two common definitions of the capital account in economics.
  • Instead, the capital account acts as a sort of miscellaneous account, measuring non-produced and non-financial assets, as well as capital transfers.
  • The capital account can be split into two categories: non-produced and non-financial assets, and capital transfers.
  • Thus, the balance of the capital account is calculated as the sum of the surpluses or deficits of net non-produced, non-financial assets, and net capital transfers.

• Changing Worker Productivity

  • In economics and long-run growth, worker productivity is influenced directly by fixed capital, human capital, physical capital, and technology.
  • In economics and long-run growth, worker productivity is influenced directly by fixed capital.
  • Human capital and increased worker productivity are critical because they are different from the tangible monetary capital or revenue.
  • Human capital grows cumulatively over a long period of time.
  • Examine the role of human capital in production and economic growth

• Capital Market

  • A capital market is a financial exchange for the buying and selling of long-term debt and equity-backed securities.
  • A key division within the capital markets is between the primary markets and secondary markets.
  • Money markets and capital markets are closely related, but are different types of financial markets.
  • When a company borrows from the primary capital markets, often the purpose is to invest in additional physical capital goods, which will be used to help increase its income.
  • The NYSE is one of the largest capital markets in the world.

• Production Inputs and Process

  • Labor, capital, and land are the three necessary inputs for any production process.
  • Production processes require three inputs: land, capital and labor.
  • Capital, otherwise known as capital assets, are manufactured goods that are used in production of goods or services.
  • For a caveman, a stick or a stone would have been considered capital.
  • While capital may refer to funds invested in a business in other disciplines such as accounting, cash is not included in capital in terms of a production input in economics.

• Inputs and Outputs of the Function

  • Capital refers to the material objects necessary for production.
  • Machinery, factory space, and tools are all types of capital.
  • Although in reality a firm may own the capital that it uses, economists typically refer to the ongoing cost of employing capital as the rental rate because the opportunity cost of employing capital is the income that a firm could receive by renting it out.
  • Thus, the price of capital is the rental rate.
  • For example, if the production function is Q=3K+2L (where K represents units of capital and L represents units of labor), then the marginal product of capital is simply three; every additional unit of capital will produce an additional three units of output.

• Other Factors of Production

  • There are three factors of production that are required to produce economic output: land, labor, and capital.
  • Capital: which are the human-made goods used in the production of other goods, such as machinery and buildings .
  • Land is sometime included with capital in certain situations, such as in service industries where land has little importance.
  • In accounting and other disciplines, the phrase "capital" can also refer to cash that have been invested in a business.
  • The classical economists also employed the word "capital" in reference to money.

• Aggregate Production

  • The aggregate production function examines how the productivity depends on the quantities of physical capital per worker and human capital per worker.
  • The aggregate production function examines how productivity, or real GDP per worker, depends on the quantities of physical capital per worker and human capital per worker.
  • Aggregate production functions create an estimated framework to determine how much of an economy's growth is related to changes in capital or changes in technology.