Tag: Capital

Industrialization brings both positive and negative effects. During industrialization, the manufacturing sector enjoyed a rapid increase in output. It also creates more jobs and income in the economy as it increases the value added of primary sector output. However, industrialization has also resulted in more population, urbanization, and pressure on social and environmental problems.

Positive effects of industrialization

Goods available in abundance and variety

The goods available are more abundant and more diverse. Industrialization allows us to have more things to buy at affordable prices. Manufacturing increased its production significantly. Machines help workers be more productive, producing more goods than ever before. Thus, prices can fall as output increases on a large scale.

On the other hand, we can also enjoy more diverse goods. Various manufacturing businesses developed during industrialization. Research and development gives rise to new innovations, not only related to the production process but also to products.

More job opportunities

Industrialization spurred various businesses to develop. When the demand for manufacturing inputs increased significantly, various businesses in the primary sector sprang up. If previously relying on small-scale businesses, large companies have started working on the primary sector. An example is an agribusiness company, which has a supply chain …

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There are several types of capital in economics and business. Some contribute directly and are used to produce goods and services. Meanwhile, others contribute indirectly. And, here, we discuss four of them:

Physical capital

Physical capital or capital goods are man-made tools – such as machines and equipment – ​​that are used to produce goods and services. That is what “capital” means in the economist’s definition when describing factors of production or economic resources. It is one of four economic resources besides land, labor and entrepreneurship.

Physical capital is vital because it provides economic benefits to businesses. It contributes directly, which companies use to assist and support the production of goods or the provision of services. For example, manufacturing companies use machines to process raw materials into intermediate or final goods.

If the accumulated physical capital increases, we expect the firm to produce more output. Improved quality also contributes to increased output, for example by adopting more sophisticated technology. So companies can increase production by investing in more capital or better quality technology.

Furthermore, the company reports fixed capital as fixed assets. In financial statements, you may know it as property, plant and equipment (PP&E). Businesses often spend a lot …

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