Thursday, July 26, 2012

Class XI, Principles of Economics, "Capital and Wealth"

Capital means wealth in ordinary sense. But in economics both are treated and defined differently from each other. Capital is defined as
“The part of wealth of individual or communities other then land which is used or intended to be used for further production of wealth.”

In other words,
“Capital is that wealth other then land which aids in the production of further wealth or which yields an income.”

Where as wealth is defined as,
“All those goods which possess utility and have value in exchange are called wealth.”

In other words,
“Economic goods are called wealth”
Thus capital includes all the goods that are used for further production for yielding income while wealth includes that can be exchanged for certain value.

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