Capital is all those goods that are used for further production of wealth. There are various types of capital as follows:
Types of Capital
Fixed capital and circulating capital: Capital goods that can be used in the production process, again and again, constitute fixed capital such as machines, furniture, and factory buildings. On the other hand, capital goods that are totally used up in a single round of production constitute circulating capital
such as raw materials of production and fuel.
Sunk capital and floating capital: Capital that has already been invested in a manner that must continue to be used for a particular purpose is called sunk capital. It cannot be transferred to any other use. On the other hand, capital that can be easily transferred between alternative uses is called floating capital.
Money capital and real capital: An amount of money is called money capital if it is used for purchasing capital goods. On the other hand, real capital is real goods and services. One can purchase real capital with the help of money capital to use as capita inputs in the production process.
Material and personal capital: Material capital consists of capital that is in tangible form and can be transferred from one person to another such as stationery and machines. On the other hand, personal capital comprises all those energies, faculties, habits which contribute to making people more efficient such as the art of singing and painting.
Production and consumption capital: Production capital includes all those things which help labor directly in
production such as raw materials and machines. Consumption capital consists of those goods which indirectly help the process of production such as food and clothes to workers.
Micro and Macro Economics
- The term ‘micro’ was derived from the Greek word ‘mikros’ which means ‘small’. Microeconomics studies the economic relationships or economic problems of an individual firm, household or consumer. It is concerned with the determination of output and price for an individual firm or industry.
- The term ‘macro’ is derived from the Greek word ‘macro’ which means large. Macroeconomics studies economic relationships or economic problems of the economy as a whole. It is concerned with the determination of the aggregate output and general price level in the economy as a whole
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