What is capital?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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The term "capital" has a different meaning to economists than it has in the minds of most people.  When most people talk about "capital" they are talking about the money needed to start a business.  However, this is not really what economists mean when they talk about capital.

To economists, capital is one of the three factors of production, the things that are needed to create goods and services.  Capital is all the means of production that are made by people.  These are things like machines that do not really fulfill our human wants but which are used to make things that do fulfill our wants.

So, just to use one example, at a law firm, the computers, copiers, desks, and other equipment are the firm's capital.

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