Business Capital

Topics: Capital, Capital accumulation, Human capital Pages: 4 (1283 words) Published: January 20, 2013
In economics, capital goods, or real capital are those already-produced durable goods that are used in production of goods or services. The capital goods are not significantly consumed, though they may depreciate in the production process. Capital is distinct from land in that capital must itself be produced by human labor before it can be a factors because of production. At any moment in time, total physical capital may be referred to as the capital stock (which is not to be confused with the capital stock of a business entity.) In a fundamental sense, capital consists of any produced thing that can enhance a person's power to perform economically useful work—a stone or an arrow is capital for a caveman who can use it as a hunting instrument, and roads are capital for inhabitants of a city. Capital is an input in the production function. Homes and personal autos are not capital but are instead durable goods because they are not used in a production effort.

In classical and neoclassical economics, capital is one of the factors of production. The others are land, labour and, according to some proponents, organization, entrepreneurship, or management. Goods with the following features are capital:

It can be used in the production of other goods (this is what makes it a factor of production). It was produced, in contrast to "land", which refers to naturally occurring resources such as geographical locations and minerals. It is not used up immediately in the process of production unlike raw materials or intermediate goods. (The significant exception to this is depreciation allowance, which like intermediate goods, is treated as a business expense.)

These distinctions of convenience have carried over to contemporary economic theory.[2][3] There was the further clarification that capital is a stock. As such, its value can be estimated at a point in time. By contrast, investment, as production to be added to the capital stock, is described as taking...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Office Space Management Essay
  • Explain the Interactions of Business and Households in the Private Enterprise System. Essay
  • Capital and Business Essay
  • Essay about Business 100
  • Evolution Of Business Essay
  • Business Management questions and answers Essay
  • The Changing Face of Business Essay
  • Business Environment in Challenging Times: a Note Essay

Become a StudyMode Member

Sign Up - It's Free