Meaning of Capital: Capital generally means money, but in Economics, the term capital means that part of man-made wealth which is used for further production of wealth. In the words of Marshall, “Capital consists of all those kinds of wealth other than free gifts of nature, which yield income.”
Characteristics of Capital:
The main characteristics of capital are as follows:
1. Capital is man-made factor of production. Under capital, only man-made factors can be included such as machines, buildings etc. On the contrary, the gifts from nature such as land, climate etc. cannot be considered as capital.
2. All wealth cannot be counted as capital, but only that part of the wealth which is helpful in further production is counted as capital.
3. No production is possible without capital. But capital does not produce anything by itself. Production is carried out with the help of capital and it is rightly said that capital is an inactive factor of production.
4. The capital involves the element of time. The capital renders its services for a period of time. This is the reason why the payment of capital is measured in terms of a particular rate, per cent and per year.
5. The capital is subjected to depreciation. The capital used in the form of machinery due to constant use suffers wear and tear. Therefore, this needs to be replaced.
6. Capital possesses the quality of mobility. Capital is the most mobile factor of production. The capitalist can carry his capital anywhere he likes without any difficulty.
7. Capital has the characteristics of elasticity. Supply of capital can be increased or decreased depending upon the situation.
8. Production is possible only due to the use of capital. The application of capital increases the efficiency of labour and productive power of all the factors of production with which it is combined and used.
