What is capital? | GDP: Measuring national income | Macroeconomics | Khan Academy | Summary and Q&A

TL;DR

Capital is a broad term that encompasses various inputs required for production, such as land, resources, equipment, supplies, and labor.

Key Insights

• 🔠 Capital encompasses various inputs required for production, such as land, resources, equipment, supplies, and labor.
• 🫵 Slaves were considered capital during the time of slavery, highlighting the distorted view of human beings as assets.
• 💁 The value of land as a percentage of national income has decreased over time, while other forms of capital, like technology and infrastructure, have become more valued.
• 🍝 Agriculture, although still significant, has become a smaller part of the overall economy compared to the past.

Transcript

The title of Thomas Piketty's book is Capital in the 21st Century. It's probably worth having a conversation about what capital is. If you're going to produce anything, you need some input, you need some factors for that production. You'd put them together. Let's say that you are a farm. Your output is food. What are your inputs going to be? This i... Read More

Questions & Answers

Q: What does capital encompass as a factor of production?

Capital includes inputs like land, water, equipment, supplies, and resources that are necessary for production.

Q: How is capital viewed in a narrow sense?

In a narrow sense, capital refers to equipment, supplies, and other tangible assets used in production.

Q: How is capital viewed in a broader sense?

In a broader sense, capital includes all inputs except labor, encompassing land, resources, equipment, supplies, and more.

Q: What is return on capital?

Return on capital measures the income generated from the employed capital. It is expressed as a percentage and represents the return on investment.

Summary & Key Takeaways

• Capital, as a factor of production, encompasses inputs such as land, water, equipment, supplies, and labor.

• Capital can be viewed in a narrow sense, referring to equipment and supplies, or in a broader sense, including all inputs except labor.

• Return on capital measures the income generated from the employed capital and is expressed as a percentage.