Tag: concept of consumption function, saving function and investment function

Interest is known as the cost of capital as a factor of production.For instance, when we keep a certain amount in bank,we get some extra money with the principle amount .This extra amount is known as interest.

Buildings,machinery,other equipment used in production process -all are regarded as capital in economics as these are fixed assets and helps to increase productivity in an economy.

Machines are the capital goods as machines are used in producing other goods ,rather than being bought by consumers.

Money invested to run an organization and fixed assets like tools,machines,and equipment- both are termed as 'capital' in economics as both help the production process to improve.

Addition to the existing stock of capital leads to increase in investment and capital formation in an economy.

Social overhead capital includes all the 'basic' services required in the production process such as,transport,irrigation,energy,education,health and medical facilities.

Over the years the rate of accumulation of net capital during a particualar accounting period has increased as the skill and knowledge of labour are increasing day by day ,which in turn is increasing the productive capacity of an economy.

Capital  as a factor of production,possess great mobility as it can be transferred from one place to another instantly.

Capital, as a factor of production, includes both assets like machines, equipment, etc and money-which are important to maintain the smooth functioning of the production process.